There's never been a better time for luxury watches.
Executives at last week's Swiss watch fairs — Baselworld Watch & Jewelry Show in Basel and the Salon International de la Haute Horlogerie in Geneva — cited robust demand for their most expensive timepieces, strong momentum in emerging markets and increased attention from women as elements that are pumping more power into their already formidable engines.
Most executives described market conditions as no less than amazing, saying that the global wealth-creation machine is propelling their most expensive products to unprecedented levels of success.
machine is propelling their most expensive products to unprecedented levels of success.
"If you haven't made money in the last couple of years, it's time to quit," said Corum owner Severin Wunderman. "It's literally insanity. In my 40 years in the business, it's never been like this."
Such declarations resounded from most leading brands, from Rolex and Omega to Patek Philippe and Cartier, all of which introduced models that retailers said are sure to drive more gains in the market.
Officials from those firms, as well as Tag Heuer, Hublot, Audemars Piguet, Zenith, Ebel, Van Cleef & Arpels, Jaeger LeCoultre, Baume & Mercier, Chopard, de Grisogono, Bulgari, Chanel, Harry Winston, David Yurman and Montblanc, all said they anticipate strong double-digit growth in 2007.
Exports of watches increased 22.7 percent in February, the most recent month reported, boosted primarily by gains in the most expensive timepieces, according to the Federation of the Swiss Watch Industry.
Watches costing more than $100,000 were plentiful at the fairs and timepieces in excess of $1 million emerged as the new benchmark for the extraordinary, largely because of demand from Asia, Russia, the Middle East and the U.S.
The bullish mood reflected the findings of a Goldman Sachs report released this month before the start of the Swiss fairs that concluded consumer demand for luxury watches is likely to accelerate in the next six months, especially for pricey and sporty styles. Results of the annual survey, which is based on responses from 89 international retail groups, representing more than 600 stores, were the most positive since the investment house began the polling in 2003."The very upper end is really driving the market," said Candy Udell, president of London Jewelers.
François-Henry Bennahmias, chief executive officer of Audemars Piguet North America, said, "Four years ago, to sell a $100,000 watch was an event. Today, it's just another sale. We sold about 80 watches above $100,000 last year in the United States alone."
Thierry Nataf, ceo, president and creative director of Zenith, owned by LVMH Moët Hennessy Louis Vuitton, said: "The top of the pyramid has opened. There is no resistance in terms of price any more."
Several executives recounted anecdotes of customers who decided to buy million-dollar timepieces in five minutes or less and all spoke about the difficulty of meeting demand for the most expensive and complicated items.
After all, most high-end Swiss manufacturers produce limited numbers. Even Patek Philippe, one of the industry's most venerable names, only produced 38,000 watches last year. A niche brand like Parmigiani, with an average ticket price of $30,000, only makes 3,500 watches a year. In contrast, a brand like Rolex is estimated to produce more than 300,000 pieces annually.
More significantly, the fairs pointed to the emergence of the superlative category of luxury: hyper-luxury.
"People don't know what to buy anymore," Bennahmias said. "They have the yacht, the jet, the houses, the art."
Jean-Claude Biver, president of Hublot, said, "We are still in the Stone Age in terms of the development of luxury watches. Momentum is building because more people are becoming aware of watches."
The boom reflects similar growth in high jewelry — extraordinary bijoux costing more than $250,000 — from houses such as Cartier, Boucheron or Van Cleef & Arpels.
Bernard Fornas, president of Cartier International, said the brand's biggest single jewelry sale last year topped $11 million.
"There is very strong demand for very expensive creations," Fornas said. "Our biggest problem is supply. People are fighting over pieces. A million-dollar sale happens at least every month. It's common."
At Montblanc, managing director Wolff Heinrichsdorff said a one-of-a-kind, $772,000 pen it co-designed with Van Cleef & Arpels sold in New York this year after only four days in the shop."A collector flew from Europe just to buy it," he said. "There's no reason not to believe that with that type of appetite for luxury, 2007 will not be another year of strong double-digit growth."
Even in the less rarified segment of watches starting at $1,000 and up, prices have climbed, with average price points escalating across the board 15 to 40 percent.
Tag Heuer president and ceo Jean-Christophe Babin said the LVMH-owned company's average watch price is up from $1,500 to almost $2,100.
Even companies like Gucci are upping the ante. The company launched the Signoria watch at Baselworld, which was designed by creative director Frida Giannini.
"The preliminary customer reactions and press comments were very positive," Gucci ceo Mark Lee told WWD. "We were able to deliver a strong design identity through our two new iconic timepieces, the Signoria and the Pantheon. The Signoria has been extremely well received and enthusiastically appreciated for its strong femininity and the Pantheon has been praised for its outstanding quality and strong personality. Both pieces successfully reinforce the watchmaking heritage of the brand."
Designs are becoming more intricate, with mechanical watches tricked out with chronographs, moon phases, tourbillons and, of course, diamonds. At Tag, for instance, 60 percent of its women's watch shimmer with diamonds now.
Diamonds on the face of a watch at the fairs — for women and men — were a must-have. Other ubiquities included mother-of-pearl faces and chronographs for women. Overall, the trend for mechanical watches for women continued to build momentum, even if quartz jewelry watches for women remain the bread and butter for most brands.
Many executives said women continue to buy men's watches. Some brands said they are no longer marketing pieces under a men's or women's classification, but in terms of sizes small, medium and large, reflecting the trend for women to buy men's timepieces.
Nonetheless, the small cocktail watch is hardly dead and several firms made notable introductions in petite sizes, including Cartier's Love watch.
"It will boomerang back to a smaller size one day," predicted Fornas of Cartier. "But even when it does, at the end of the day, the smallest size will still be bigger than it used to be."Other notable trends included the prevalent use of rose gold, chocolate-colored dials, rubber straps and larger sizes, noted retailers.
"Everyone has a 45-ml. [case] and up," said Andrew Block, vice president of Tourneau, who added that he sees no obstacles to another year of strong double-digit growth.
Block pointed to "great" introductions this year from IWC, Cartier, Rolex, Patek Philippe, Corum, Zenith and Breguet.
London Jeweler's Udell praised Rolex's new Milgaus and Yacht-Master II watches, Hublot's pink gold Big Bang, Hermès' more complicated watches born of the Paris luxury firm's recent acquisition of a stake in Swiss manufacturer Vaucher, Harry Winston and Van Cleef & Arpel's "exceptional" jewelry watches for women, as well as pieces from Audemars Piguet and Chopard.
Michael Pollak, ceo of Hyde Park Jewelers, also saluted Rolex's watches, as well as creations by Jaeger LeCoultre, Panerai and Girard-Perregaux.
"There's a lot of styling in ladies' watches and they have larger cases, with more complications for women," said Pollak.
Retro touches were another trend. Perhaps the most notable introduction in this direction was Cartier's Ballon Bleu wristwatch that retailers praised as a sure-fire hit and a strong follow-up to the brand's La Doña watch of last year.
"It is a very salable and very beautiful retro watch," said Udell of the Ballon Bleu, with a raised curved crystal and retro numerals.
Watch executives said one of the characteristics of the current market was that all geographical zones — from Asia, Europe and America — are whirring full-cylinder, with Japan the only trouble zone.
"Every market is equally strong," said Philippe Stern, president of Patek Philippe. "Demand really is growing because there are many new customers. People are interested in watches because they are still made by human hands. People want something that lasts."
They also, apparently, want something rare. Limited edition products, which have performed so well with collectors, are becoming more common. Executives said the ploy remains an effective selling tool.
"Limited edition is one of our fastest-growing categories," said Karl-Friedrich Scheufele, vice president of Chopard."Limited editions are still going great," said Wunderman of Corum. "But it's true that it's gotten to the point that it's almost ridiculous. There are limited edition Tissots."
Celebrity tie-ins are another continuing phenomenon. Christian Dior, for example, has signed Sharon Stone to appear in advertising for its timepieces. The stunning Russian soprano Anna Netrebko is the new face of Chopard.
Jewelry was another important component at the shows, though most American retailers said it was watches that bring them to Switzerland.
Retailers said rose gold, large chain links, cameos, ancient coins and a return to "beautiful classic things" were the main themes.
Standout collections came from Roberto Coin, David Yurman, Mikimoto and de Grisogono, which presented a multimillion dollar 45-carat ruby ring.
David Yurman reported a strong start to the year, saying he expected 2007 to yield double-digit gains again. Among the house's novelties were watches designed by Yurman's son, Evan. Yurman showcased pieces with mineral stones, such as malachite, adding color to his collection.
Roberto Coin said "business is very good" thanks to sales in Russia, the United Arab Emirates and the U.S. Coin used gemstones like citrine to give his rose and yellow gold mesh pieces a touch of verve.
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