Bloomberg: Audemars Piguet CEO Expects to Exit Watchmaker With Record Sales

• Record result would cap CEO’s 30-year career at watchmaker
• Royal Oak models to stay scarce even as production rises

 

By Andy Hoffman  6 september 2023 at 06:00 CEST

 

The head of Audemars Piguet said sales at the Swiss luxury watch brand are headed for another record in 2023 as demand for its pricey timepieces remains strong.

“At the end of July our inventory was the lowest ever,” Chief Executive Officer Francois-Henry Bennahmias said in an interview at the company’s offices in Lausanne, Switzerland. Annual sales could climb by a double-digit percentage to 2.4 billion francs ($2.7 billion) this year, outpacing the industry, he said.

Audemars Piguet’s timepieces, led by its flagship Royal Oak model, are still attracting buyers as economies cool and even some well-heeled consumers feel the pinch from inflation.

A member of the “holy trinity” of Swiss watchmaking, known for producing highly complicated and fastidiously-finished timepieces that includes Patek Philippe and Vacheron Constantin, Audemars Piguet produces some 50,000 watches a year at an average price of about 50,000 francs apiece. It’s the No. 4 Swiss brand by revenue, generating just over 2 billion francs in sales in 2022, mostly at its own branded stores, according to Morgan Stanley estimates. Another record sales result would cap Bennahmias’s more than 30-year career at the Swiss watchmaker, with over a decade as CEO. He plans to step down at the end of this year, to be replaced by former Procter & Gamble Co. executive Ilaria Resta. Record sales aside, the French-born former professional golfer sees reasons for caution. Audemars Piguet’s strength “doesn’t mean that the world couldn’t go into a slightly more troubled time,” Bennahmias said. “I don’t think we have absolute optimism.”

He cited the slowing global economy, Russia’s war on Ukraine and challenges in China, where a post-Covid rebound has been weaker than anticipated. What’s more, prices for used models have tumbled after a surge during the pandemic.

An index of Audemars Piguet watches compiled by WatchCharts is down almost 20% in a year and 8.8% in six months, even as more than three-quarters of the brand’s second-hand models continue to fetch prices above retail.

In response to rising watch theft, the brand earlier this year launched an unprecedented program to guarantee buyers of its watches in 2022 and 2023 a replacement or refund if the timepieces are stolen.

While the service has led to millions of francs in insurance costs, the brand hasn’t yet been faced with a claim for a stolen or damaged watch, Bennahmias said.

The watchmaker is increasing production by double-digit percentages annually, and raising prices by 2% to 3% a year on average, the CEO said. Output could reach 56,000 or 57,000 watches a year by 2025.

Despite the higher production, shoppers looking for the most in-demand models may still find themselves on a waiting list. Audemars Piguet makes at most 1,450 of each model reference a year and just 1,000 of the most desirable models, such as the Royal Oak Jumbo with a blue dial, Bennahmias said.

The Code 11:59 — a line launched in 2019 that divided some in the collecting community — now accounts for close to 15% of revenue, he said. The line is on track to reach 20% of sales by 2025, reducing the brand’s dependence on the Royal Oak and its Offshore model spinoff.

Producing too many watches during good times, only to be left with excess inventory as demand falls off, has often been a critical error made by luxury watch brands. Bennahmias said the company’s unsold inventory sits at record lows.

“That’s unheard of,” he said. “It means that we finally got it right in terms of our capacity.”

— With assistance by Gina Turner