Johann Rupert, who controls Swiss luxury goods group Richemont, has warned that prices for second-hand, high-end watches are distorting prices in the market.
Rupert was addressing analysts after the release of the group’s annual year results, which saw its operating profit surge 34% to €5bn.
SA’s richest man said he is worried about what he is seeing in the second-hand luxury watches market. He gave an example of a watch Richemont had priced at €34,000, only to learn four months after it launched that somebody sold the brand for €89,000 at an auction.
“The second-hand watch market needs to come down,” he said.
Referring to the Odysseus, he said that when Wilhelm Schmid and his colleagues “presented that steel watch to me and they wanted to sell it at €28,000, I said, ‘you’re mad. It’s too little’. So we settled with €34,000.
“Months later somebody bought the watch, and then we had quite a discussion with him, put it up for sale at auction, it sold for €89,000.
“So now you would say normal economics would say, move the price to €45,000, [or] €50,000, but we look at the input and the costs ... we think there’s a fair price for a product. Because if you want your clients and their children to be your clients, then you treat people properly. And that also means that there’s a residual value for their watches that they don’t buy.”
Richemont launched Odysseus in 2019, which marked the start of a new chapter for A Lange & Söhne, of which Schmid is CEO.
Rupert also made reference to the Cartier brand. “We have a situation where Cartier did a limited addition of the Pebble watch, 150 pieces. And tomorrow, at the Phillips auction, watch number 71, which the lady must have designated the number because she got her watch before I got my watch ... so before number 150 gets, she’s putting it up for auction tomorrow ... there’s a craziness in the second-hand watch market and the speculation.”
According to data released by Boston Consulting Group (BCG) in March, luxury watches are in demand as alternative investments.
BCG also found that buyers are paying high premiums for pre-owned models from top brands as well as from leading independents such as FP Journe & De Bethune, with the expectation that the value of these watches will continue to rise.
The data shows that from August 2018 to January 2023 average prices in the second-hand market for top models from the three largest luxury brands — Rolex, Patek Philippe and Audemars Piguet — rose at an annual rate of 20%. BCG said pre-owned watch sales reached $22bn in 2021, accounting for nearly one-third of the overall $75bn luxury watch market.
Richemont owns luxury watch brands such as Cartier, IWC, Jaeger LeCoultre, Montblanc and Panerai.
The group in 2018 bought British-based Watchfinder, a company that buy and sell premium pre-owned watches.
The Geneva-based company recently launched a digital platform, Enquirus, which aims to reduce watch and jewellery theft and to authenticate second-hand sales.
Richemont’s latest results show that the group benefited handsomely from a rebound in spending from the world’s biggest market for luxury timepieces, China. The Asian powerhouse has seen demand roar back after the easing of Covid-19 restrictions.
Asia Pacific sales
Richemont’s sales in the year ended March reached a record high of €20bn, a 19% year-on-year increase. Richemont’s core jewellery division, home to Cartier and Van Cleef & Arpels, drove profitability with a margin just shy of 35%.
“The final quarter recorded a significant sales increase as sales in Asia Pacific resumed growth following the removal of travel and health restrictions in mainland China. All the business areas, distribution channels and regions posted growth during the year. This performance was led by retail, Japan and Europe, closely followed by the Americas,” Rupert said.
“Our Specialist Watchmakers performed strongly with combined sales of €3.9bn and operating margin improving to 19% compared to the prior year. Over the past six years, the Specialist Watchmakers have undergone a profound evolution of their business model, which has successfully led to direct-to-client sales reaching 56% of sales this financial year while sales in branded environments neared three-quarters of their sales.”
The company also announced plans to buy back as many as 10-million A shares, representing 1.7% of the company’s capital.
Rupert established Richemont in the late 1980s and his family owns more than 9% of Richemont, but has 50% of the voting rights via ownership of 100% of the nonlisted B shares.
The group has its primary listing in Switzerland and a secondary listing in the JSE, where it has a market capitalisation of about R1.7-trillion.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.