- Watchmaker backtracks after push into technical timepieces
- “Cartier wasn’t taken seriously enough” by connoiseurs
For over a century, Cartier has sold elegant, if simple, timepieces such as the Tank, which starts around $2,500 -- affordable by Swiss watch standards, and never confused with the level of technical finesse from brands like Patek Philippe.
Then a decade ago, Cartier sought to prove its own prowess, investing millions to build one of Switzerland’s largest watch factories and bringing in an industry veteran to head a fine watchmaking unit. The jeweler delved into the segment for connoisseurs known as “complicated pieces,” which sport analog mechanisms such as calendars that adjust for leap years and require painstaking hand craftsmanship. The effort culminated last year in the Rotonde de Cartier Grande Complication Skeleton, a glass-backed confection priced at more than $600,000.
But then the Chinese demand that had supported the market collapsed. Wednesday, Cartier’s parent, Richemont, said that first-half profit will fall about 45 percent, a level Chairman Johann Rupert called “unacceptable.” In response, Cartier has cut jobs, bought back unsold inventory from retailers, and is refocusing on more affordable pieces. The retrenchment is a cautionary tale for the industry and for businesses in general -- a reminder that luxury demand is ephemeral and that stretching a brand beyond its comfort zone carries considerable risk.
“Cartier has a very classic style, and that alone is already perceived as a status symbol,” said Manfred Abraham, a partner at consultancy BrandCap in London. “Consumers still get the same impact with a 2,000 pound watch as they do with a 8,000 pound watch, because people will still say, ‘Oh my God, it’s a Cartier!’”
Cartier began its push into fine watchmaking in 2008, creating a division led by Carole Forestier-Kasapi, a watch-industry veteran who had worked at Audemars Piguet. While Richemont doesn’t say how much it spent, the Geneva-based company probably invested about 150 million euros ($168 million) in Cartier’s watch business, with about a third of that focused on higher-end complicated timepieces, estimates Jon Cox, an analyst at Kepler Cheuvreux.
In the following years, Cartier developed dozens of new movements -- the engine of a watch -- to improve its reputation and show that it belongs in the same league as the likes of Patek Philippe, Vacheron Constantin and Breguet, which have focused on complicated timepieces for more than a century.
For Cartier, a brand traditionally associated with jewelry for women, joining that men’s club was a stretch. Unlike the brands it was chasing, which are focused almost exclusively on watches, Cartier has a broad luxury portfolio of leather handbags, fragrances and sunglasses.
But the company saw rich rewards in going upmarket: brands that have hyper-expensive handcrafted watches at the top of the lineup can typically charge more even for their less expensive offerings.
“In the man’s connoisseur world, Cartier wasn’t taken seriously enough,” said Patrik Schwendimann, an analyst at Zuercher Kantonalbank. “But to change an image can take decades.”
‘Blinded By China’
The Ballon Bleu line, introduced in 2007 and favored by the likes of the Duchess of Cambridge -- the former Kate Middleton, the wife of Prince William -- was a hit. But while it might account for as much as half the brand’s sales in China, later collections never gained the same traction, according to Zuzanna Pusz, an analyst at Berenberg.
“Cartier was blinded by the boom in China,” Pusz said.
A campaign against extravagant spending and corruption in China has crimped demand for watches there. And in Europe terrorist attacks have cut the numbers of free-spending tourists who make up a big chunk of sales. Cartier has had three chief executives in the past half-decade as earnings growth at Richemont’s jewelry business flattened from rates exceeding 40 percent.
Cartier joins the likes of TAG Heuer, Tiffany and Bulgari, brands that have tried to extend their range of Swiss watches and later backtracked as the market didn’t support them. Other jewelry houses such as Piaget and Chopard have also broadened their presence in the watch industry, but no other company went quite as far as Cartier.
The watchmaker this year introduced a lower-priced new collection for men, called Drive, which starts at about $6,000. At a watch salon in Geneva in January, the company plans to present a selection of more feminine watches with fewer complications that cost less, going back to the brand’s roots.
“We have to slim down into the real demand of the market,” said Rupert, the Richemont chairman. “The world currently has an excess of every manufactured good.”