PARIS — A management reshuffle at the top ranks of LVMH Moët Hennessy Louis Vuitton’s watches and jewelry division has thrust Frédéric Arnault, the youngest executive in the Arnault clan, to the helm of Tag Heuer — and into the spotlight.
It is a role that the 25-year-old math and computer science whiz has been preparing for by bolstering the digital firepower of the historic watchmaker and developing its third generation of connected watches.
The young Arnault, who joined Tag Heuer three years ago, said he was drawn to the label for the entrepreneurial challenge, with several fronts to tackle.
“It is multifaceted — working to bring this historic, 160-year-old label up-to-date, modernizing it, and nudging it beyond its traditional expertise to be a global brand known for its values,” said Arnault, speaking to WWD via Zoom from Switzerland, where he had just returned from his lockdown quarters in Paris for the first time.
The executive has long been accustomed to holding Zoom meetings — he shuttles between Tag Heuer headquarters at Chaux-de-Fonds, Switzerland, and Paris in normal times — but the coronavirus has increased the amount of remote working for the brand’s teams.
“This is the challenge that really drew me, and once I get involved in something, I like to commit myself in the long term,” continued the executive, whose duties as ceo will soon include brand development.
“I have a particular affection for this brand — my first watches were from Tag Heuer,” he added.
Known for its iconic Carrera and Monaco watch models, the watchmaker markets itself as a label that focuses on the avant-garde, innovation and performance.
Arnault — who graduated from the prestigious French École Polytechnique, as did his father, LVMH chairman and chief executive officer Bernard Arnault — started at Tag Heuer as the head of connected technologies before becoming chief strategy and digital officer two years ago.
The young executive oversaw the launch of a new web site for the brand, as well as the development of a new generation of sports-oriented connected watches — including a golf watch released Thursday. It is the second golf watch developed under Arnault’s direction; the first was introduced by him at Baselworld last year.
LVMH unveiled Arnault’s appointment Thursday, as well as the promotion of Stéphane Bianchi, Arnault’s superior who has been serving as ceo of Tag Heuer while also overseeing watch brands Zenith and Hublot — each of which has its own ceo’s. Jewelry labels Chaumet and Fred will be added to Bianchi’s responsibilities.
Bianchi has “given the watchmaking division a new lease on life, strengthening the fundamental principles of each of the brands and exploring promising new avenues,” said Bernard Arnault, adding he expects the executive to apply similar efforts to Chaumet and Fred.
Chaumet ceo Jean-Marc Mansvelt and Fred ceo Charles Leung will report to Bianchi.
Bulgari ceo Jean-Christophe Babin will continue to report to LVMH managing director Antonio Belloni, as does Bianchi.
The appointment of his son, Frédéric Arnault, affirms the young executive’s achievements at Tag Heuer, where he “succeeded in combining innovation, heritage and savoir-faire within this historic brand,” Bernard Arnault continued.
“These two appointments demonstrate our full confidence in the growth potential of these brands. I wish them every success going forward,” said Bernard Arnault.
The promotions of Bianchi and Arnault, which are effective at the start of July, come as the luxury sector grapples with disruption from the coronavirus pandemic, which has prompted the closure of high-end boutiques around the world and brought another key revenue source to a standstill: traveling tourists. The challenging environment has even cast uncertainty on LMVH’s plans to purchase Tiffany, a deal that would be the largest M&A transaction for the group and further consolidate its position as the global leader in luxury.
The Swiss watches business, entered the crisis already weakened by competition from the rise of the Apple watch. According to Strategy Analytics, the tech giant sold 31 million Apple Watches in 2019, outpacing the 21.1 million units sold by Swiss watch brands, figures that highlight the industry’s challenge to gain relevance with new generations of consumers.
McKinsey released a study this week estimating the watches and jewelry segment will be hardest hit segment of the industry for high-end goods, with business likely down between 25 and 45 percent this year, compared with declines in the range of 15 to 35 percent for leather goods and accessories.
While it is too early to get a good measure of the impact of the current crisis on the brand, Frédéric Arnault holds an optimistic view on the outlook for the watchmaker.
“We are following the reopening of all markets, the latest being the U.S. and the U.K. — both are very important for Tag Heuer, but when the global luxury market starts back up again, so will the watches — there is no reason they would be significantly more affected than the rest of luxury,” he said.
For one, the label is not heavily dependent on traveling tourists — a key revenue source for the luxury industry in pre-COVID-19 times, Arnault pointed out.
“Tag Heuer is not so dependent on tourists — the client segment that will take the longest to return — travel retail, and Chinese tourists represented a small part of the business, so we won’t have a loss here in the mid term,” predicted the executive.
Digital sales emerged as a bright patch in business at Tag Heuer during the lockdown periods — another reason for optimism, he noted.
“Sales in e-commerce were up four to five times last year’s levels — as soon as a country reopens, it brings traffic and business picks up well,” said Arnault.
The brand rolled out a new Internet platform in the U.S. in March as it launched the new generation of connected watches — a project spearheaded by the executive, who recruited people with expertise in software engineering for the project and, in start-up fashion, expanded his team of two initially to around 30 people in a short time at the label.
The New York launch event for the watches took place just hours before the city went into lockdown, with a slightly smaller crowd than originally planned, and without the accompanying dinner. The first major, brand event in a while, marked a “promising start,” for the new products, and generated good feedback in the press, said Arnault.
Then countries began shutting their borders, one by one, stores across Europe and the U.S. closed up and people hunkered down in their homes. The New York event was the executive’s last trip abroad before activities ground to a halt.
“It caught everybody by surprise, I didn’t think it would happen so quickly, the lockdown spreading all over,” recalled Arnault.
A week later, the brand had stopped production in Switzerland — the cessation of activity there lasted a month and a half.
“The priority was to ensure the safety of everyone at Tag Heuer,” he said, noting that many projects pursued during the lockdown period were aimed at implementing safe working conditions for staff.
The brand aims to finish up reopening its stores over the summer, and production has resumed but executives are working toward a gradual buildup of activity back to full levels. Some projects planned for the year have been pushed back to 2021, and the brand continues to make adjustments from week to week, given the ongoing lack of visibility, said Arnault.
Among strategic projects the company hopes to maintain this year is the launch of a major Carrera collection as well as a new store concept — starting with a new store in Zurich, he said, declining to provide details about the new format.
Some other store openings planned this year may be postponed until the end of this year or the beginning of next.
“We maintained certain priority projects in the digital realm,” he noted, citing the surge in sales online during the lockdown periods as motivation for sticking with the planned rollout e-commerce platforms in Europe.
In China, where the label has had a smaller presence than in English-speaking countries like the U.S., the U.K. and Australia, which remain its main markets, there are also some key, strategic plans in the works.
“We’ve seen that the connected watch has done well, and we are preparing the future launch of a mechanical watch, with a special focus on China,” said Arnault. Priced at less than $2,000, lower than the average price tag for Tag Heuer watches, which is closer to $3,000, connected watches serve as an entry point to the label for new generations of consumers that could purchase a mechanical watch at a later stage.
Tag Heuer was the first Swiss luxury watch label to enter the connected timepiece business, launching its debut model in 2015, the same year as the first Apple Watch, a move orchestrated by industry veteran Jean-Claude Biver, who headed the group’s watch division until 2018.
As for events and sponsorships, many have been delayed, Arnault added, noting events organized around the Monaco Grand Prix were scuppered by the cancellation of the famous car race.
“We will wait for several months of optimism before resuming a more ambitious program,” noted the executive.
In the meantime, activity has sped up in other areas, he observed.
“What we’ve noticed during this crisis is that there were underlying trends that have been accelerated,” he said, citing a pickup in online commerce as an example.
“Speaking of e-commerce, it was a trend that was already there — in the luxury market and the watch market — also for high-end watches. Today there are people who buy watches for 20,000 or 30,000 euros with a click on their smartphones,” he said.
Asked if the health crisis may have deepened an interest in connected watches, he pointed to their role in measuring sports performance.
“In the beginning, three years ago we wondered if connected watches were just a passing trend, a gadget, and that people would get tired of them. But we are seeing this is really not the case and there is less and less of a debate — we are convinced that they have a real place in the life of our clients who use them — one of the axes is health,” he said.
“We work on the measuring sports performance — running, cycling, golf, and we see a strong demand on these products, and this is accelerating — this is certain — but the trend was already there,” he said.
When it comes to management style, Arnault noted an emphasis on agility and coordination, breaking away from the traditional silo structures with cross-functional teams.
Asked about his younger brother, who is studying business at MIT and shares an interest in watches, Arnault smiled and said Jean Arnault had just sent him a report on his internship at Tag Heuer’s research and development facility.
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