Harry Winston Avenue C Precious Marquetry watch.

A year after completing its acquisition, the group is looking to build Harry Winston into a billion-dollar brand.

BASEL, Switzerland — The Swatch Group is looking to build Harry Winston into a billion-dollar brand.

This story first appeared in the May 19, 2014 issue of WWD. Subscribe Today.

A year after completing its acquisition of the diamond jewelry and timepiece division of Harry Winston for an enterprise value of $1 billion, including pro forma net debt of up to $250 million, the world’s biggest watchmaker has lifted the lid on its strategy for growing the brand.

Nayla Hayek, chairwoman of the board of Swatch Group and chief executive officer of Harry Winston, is spearheading the expansion effort.

It includes the planned opening this year of Harry Winston salons in Cannes, Hawaii and Las Vegas and the reopening of its salon on Avenue Montaigne in Paris in November, Hayek said at Swatch Group’s annual media conference, which was held at the Harry Winston watchmaking facility outside of Geneva — a move that reflects the brand’s strategic importance to its new owners.

In parallel, Swatch Group is working to ramp up Harry Winston’s wholesale business through its own high-end Tourbillon stores, the Rivoli retail network in the Middle East — which it took over in November 2013 — and select independent retailers.

In an interview with WWD at the Baselworld fair, Hayek confirmed she is steering the brand toward $1 billion in sales — though she does not expect that target to be reached for another five years, at least.

“We feel that the brand does have the potential to one day achieve $1 billion in sales, but this growth will take time and the right economic conditions,” she said, declining to provide a sales figure for 2013. The luxury division posted sales of $314.5 million in the nine months ended October 2012, the last reporting period before the acquisition.

Besides giving Swatch Group an entry into the high-jewelry segment, Harry Winston strengthens the group’s presence in the key U.S. and Japanese markets. The jeweler counts 26 directly operated salons worldwide, though conversely, it has relatively little coverage in Europe, with no stores in Italy and Spain, for example.

“Our first priority will be on the expansion and development of our own retail network,” said Hayek, noting the brand will open its first location in Germany next year when it takes over the Hermès store on Düsseldorf’s Königsallee.

Harry Winston has been ramping up jewelry production and building its inventory of precious stones, starting with last year’s high-profile purchase of the Winston Legacy diamond, weighing 101.73 carats, for $26.7 million.

“When we first started we had our sales executives telling us, ‘We could sell so much more if we could have better stock in this collection, or in this stone.’ So we assessed our stock and have spent the past year building up the areas that we needed to improve,” said Hayek.

“We have invested a lot for our jewelry production in New York to make sure that our salons have the right amount of stock to support sales. We have also been working to really push the production for our more accessible jewelry pieces,” she added.

Hayek noted that previously, Harry Winston — like many jewelers — worked mainly with precious stones on consignment from third-party dealers.

“The challenge with diamonds and gems is that one day you can have a dealer come to you and say, ‘I have this incredible stone, but if you don’t buy it now then someone else will,’” she noted.

Owning the stones will boost margins for Swatch Group, even if it fattens its inventories, which rose to 5.4 billion Swiss francs, or $5.8 billion, in 2013 from 4.4 billion Swiss francs, or $4.7 billion, the previous year — of which 400 million Swiss francs, or $432 million, was due to the integration of Harry Winston.

“Everything is interconnected when you want to really grow and build a business like Harry Winston. You have to invest in the stones, you have to invest in more people to create the product, and you have to invest in the whole production process — so this is what we did,” Hayek said.

Harry Winston is also seeking to boost its watch business, which accounts for 22 percent of sales at present — a percentage the executive sees as potentially rising to 30 percent. To that end, it aims to increase its production of timepieces to 10,000 a year from 6,000 in the medium-term.

“Asia has been an important market for us in terms of our jewelry business, so now the focus will need to be on strengthening our timepiece business there as well. We are not as visible as we could be, particularly in wholesale,” Hayek noted.

She has put her son Marc Hayek, ceo of high-end brands Blancpain, Breguet and Jaquet Droz, in charge of complicated timepieces at Harry Winston, which come equipped with Blancpain movements.

Pieces presented at Baselworld include the brand’s signature diamond watches as well as the Histoire de Tourbillon V, a men’s triple axis tourbillon in rose gold available in a limited edition of 20 retailing for $655,000.

Though it did not unveil an Opus timepiece this year, Nayla Hayek said Harry Winston plans to pursue the prestigious series, which has seen it collaborate in the past with master watchmakers including François-Paul Journe and the duo of Robert Greubel and Stephen Forsey.

Despite all the investments, she is pleased with the return on the brand so far.

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“The profitability is very good at Harry Winston. Our first year has really been about transition and development, and we have been very happy and pleased with how everything is progressing,” Hayek said.

“We do not feel that [the brand] was overpriced. Harry Winston has had a tremendous history, but it also has a tremendous future ahead of it. We have invested in Harry Winston for the long-term, and are excited by all of the potential that has yet to be realized,” she added.

Going forward, she plans to keep the brand’s price points unchanged, even if margins improve.

In jewelry, they range from around $4,000 for a small wedding band without diamonds to millions of dollars — for example, the Flawless Winston Cluster Diamond, worn by Charlize Theron at the Oscars and displayed at Harry Winston’s Baselworld stand, costs $15 million.

The Winston Legacy diamond purchased last year has inspired a high-jewelry collection in which each set is made of 101 stones. First shown to VIP clients in New York on Feb. 20, it will alight next in Paris — coinciding with the reopening of the Avenue Montaigne salon, and not the Biennale des Antiquaires, the most important fine-jewelry exhibition in the world taking place in September.

“We did not get the size of space we had requested to properly showcase all of our pieces [at the Biennale]. We decided that it did not make sense for us to participate this year, if we could not do it in the right way for the brand,” said Hayek, adding that Harry Winston hopes to be back at the Biennale in two years’ time.

In the meantime, it is working on other image-building projects, including the restoration of Harry Winston’s office on Fifth Avenue in New York. “This is where Mr. Winston showed his best customers all his favorite pieces — it would be wonderful for us to be able to use for very special occasions,” said Hayek.

Listening to her recounting anecdotes about the brand’s founder, it is clear that Hayek considers Harry Winston a passion project.

“I truly love this brand,” she said. “You know, if it were just a jewelry brand, it would still be appealing — jewelry is certainly attractive, and of course diamonds are beautiful. But if there weren’t the history behind it, I don’t think we would have bought it.”

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