By  on June 18, 2007

PARIS — Underscoring faith in the continued buoyancy of the luxury watch business, Swatch Group last week opened a sprawling flagship on the Place Vendôme here for its most prestigious brand, Breguet.

At 5,000 square feet, it is the largest shop to date for the brand, and it was personally spearheaded by Nicolas G. Hayek, 79, the charismatic chairman and founder of the group, who was chauffeured in from Switzerland for the inauguration because he hates to fly.

With twin Breguets dangling from each of his wrists, as well as a plastic Swatch and a chunky Omega, Hayek said the store is part of his strategy to double the high-end brand's sales in the next few years.

Already Hayek has boosted Breguet's annual watch production to 30,000 pieces this year from 4,000 in 1999, when he purchased the business from Investcorp, the Anglo-Arab holding company that also used to control Gucci.

Breguet's sales last year rose 42.5 percent to 500 million Swiss francs, or $401.7 million at current exchange.

Hayek said the brand is the most profitable in percentage terms in the group, which includes the Omega, Swatch, Rado, Longines, Blancpain, Jaquet Droz and Glashutte Original brands.

"When I bought Breguet no one wanted it," said Hayek in an interview, which addressed subjects from whether the boom in luxury watches is sustainable to his efforts to help restore the Petit Trianon in Versailles.

"[Investcorp] tried to list it on the stock market and no one would buy the shares," he remembered. "Today we have passed Patek Philippe in terms of sales." (Last year Patek Philippe said it produced 38,000 watches.)

Hayek said his goal was for Breguet to attain one billion Swiss francs, or more than $800 million, in sales. In two years, he said the house's production capacity should reach 50,000 pieces.

Though Hayek stepped away from the day-to-day running of Swatch Group a few years ago, transferring those duties to his son, Nicolas Hayek Jr., he has taken the development of Breguet, which was founded in 1775 by Abraham-Louis Breguet, as his personal project.

The Paris store provides the brand with its fullest expression to date. With a stark modern decor, it offers 150 different Breguet styles, the most expressive running up to 500,000 euros, or $665,000.There is a museum on the second floor with scores of antique Breguets culled by Hayek at auction. "We have some 900 pieces in the archive now," he said.

Perusing the museum, visitors get an introduction to one of history's most innovative watchmakers. Breguet, for example, invented the tourbillion, a mechanism that compensates for the effect of gravity on time, and he devised a self-winding mechanism in his pocket watches that made him a darling among the European aristocracy.

Hayek has tried to shore up Breguet's heritage by introducing models inspired by the founder's early creations. At present, for example, he is re-creating a pocket watch that was ordered for Marie Antoinette and has been missing since 1983, when it was stolen from a museum in Jerusalem. Hayek said he planned to unveil the replica of the watch, the original of which was ordered from Breguet by one of the doomed queen's paramours, at next year's watch fair in Basel, Switzerland.

To strengthen the brand's link to Antoinette, Hayek has donated 5 million euros, or $6.6 million, to renovate the Petit Trianon at Versailles, a small palace built for Madame Pompadour where Antoinette liked to seek refuge from the cacophony of court.

Asked how long the current boom in luxury watches will last, Hayek replied with a German proverb: "Trees do not grow in the sky," he said. "One day it will stop. That day has not come — though already we've seen that in some markets the increases of 35 to 40 percent a year are starting to cool some. That may be a sign."

He said robust demand continued in Russia, China, Japan and Europe, adding the biggest challenge for the group today is training artisans to be fast enough to keep up with demand.

"These ladies from Russia come into the shop and buy a 500,000 euro [$665,000] Breguet and say they want another one right away," he said. "It's hard to keep up with that."

Despite mixed success with its attempts to break into the jewelry market, Hayek said Swatch Group was accelerating efforts to build its bijoux business.

At Breguet, for instance, he said jewelry sales currently accounted for about 7 percent of total sales."It can be much higher," he said. "We are watchmakers trying to become jewelers. Jewelry has not been easy for us. We didn't know how to sell jewels."

Hayek said "a lot of women" had been hired to help speed the development of jewelry for the firm.

"Branded jewelry will be the future," he said. "Why? Because so many people are cheating. There are so many cheap pieces of low quality that are being made in China and India. With that happening people want to turn to well-known brands that can assure top quality."

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