In an industry with far too many brands, even the almighty watch groups have more brand labels than worldwide demand can accommodate.

Omega, the cash cow of the value focused Swatch Group, metaphorically powers the entire train (group). In a time of prosperity, it might not matter how many train cars it pulls behind it. However, luxury sales have slowed down, and in a time of economic volatility, is it finally time to sell off some of the dead weight?

To think that cutting off one or two underperforming brands, could generate a significant instant cash infusion, to a publicly traded company, while removing excessive drag on the entire train (group), seems like a gift.

Look at the recent sale of Baume & Mercier by the Richemont Group as a precedent for purging one of the lower performing brands within the group, and generating significant positive cash flow.

There was a recent podcast, which operates on the retail side of the watch business, that suggested watch groups need all their brands to operate efficiently. Prior to the Baume & Mercier sale, I heard that, and I could not have disagreed more. You’d have to be blind not to see that the big groups are over burdened by too many watch brands.

The Richemont Group’s sell off of valuable yet underperforming asset, likely for 8-figures, is business and strategy optimization 101. There was presumably no reliance on that brand for any other operations within the Richemont Group, not to mention, there are already watches from Montblanc that cover that price range. Richemont can now lean into lower price points via Montblanc, if they see that as an area worth targeting. Moreover, Montblanc has a huge distribution network of 500+ stores, already in place, whereas Baume & Mercier has none. Now Richemont can focus on growing Montblanc, at a faster pace, with a renewed strategy that does not internally compete with Baume & Mercier. Brilliant move by Richemont.

Another purportedly strong move was the shuttering of Carl F. Bucherer this time last year by Rolex. They acquired the underperforming watch brand when they bought mega-retailer Bucherer in 2023, and presumably stripped or sold off whatever Carl F. Bucherer assets they deemed worthy. Less than two years later, Rolex shuttered the entire Carl F. Bucherer watch brand. Clearly, the Rolex group wants to focus on Rolex, Tudor, and Bucherer, and nothing else.

Final Thoughts

The Swatch Group’s leading watch brand Omega, is akin to Richemont’s Cartier, and will continue to drive group sales, along with strong performers like Swatch and Longines. However, some of the other watch brands might be good options to sell off. The Swatch Group appears adamant in keeping Breguet and Blancpain. Perhaps Jaquet Droz, Glashutte Original, Rado, or Mido could be worth exploring as divestments. Such a strategy could greatly reduce risk and increase share price by removing underperforming assets, boosting cash reserves, restricting cannibalization, and strengthening the group’s overall focus.

 

Rendering by Nano Banana Pro.