A Dick Move - The Transfer Window Opens at Richemont

Yes, gentle reader, it's going to get a bit "blue"...

Per the Urban Dictionary:

Dick move

When a person goes out of their way to do something that barely improves their life but greatly inconveniences those around them for no other reason than to be a dick

by Pinkman84 July 13, 2015

Word reached the Northshore offices of Tempus Fugit late yesterday afternoon that the shot-callers at Richemont once again had a bad case of the fidgets. And as someone far smarter, better informed and (if we're being honest about it), better liked than yours truly (G. Pons) puts it, the latest game of musical chairs is on. And it seems that this time the axe is falling on someone who did what they were asked to do, and now has gotten her ticket punched as a thank-you.

Chabi Nouri, if the reports from Ms. Tweed, Bilan, Le Temps, and other sources are to be believed, has been relieved of her position at Piaget. The reasoning given that sales at Piaget have been slumping (which is not exactly "new" news), and per Ms. Tweed -

"Several industry sources blamed Chabi, saying she had focused too much on high jewelry, the Middle East and Asia and neglected Piaget’s core watch customers in other regions." 

Shamelessly borrowed from the World-Wide Infoweb

Now let's jump in the "Wayback Machine" to those thrilling days of...just over four years ago, when Ms. Chabi was appointed CEO and her predecessor had this to say about high jewelry watches -

https://www.ft.com/content/4ebad466-f82b-11e6-bd4e-68d53499ed71

(As the Financial Times has some pretty sticky policies about quoting their articles, I urge you to read the article linked above).

To paraphrase, Philippe Léopold-Metzger essentially said that Piaget had probably neglected jewelry watches too much, and that this would be part of Ms. Nouri's mandate. Even more ironic when you consider that the young man warming up on the touchline and getting ready to take off his tracksuit and go into the match is coming from... you guessed it - a JEWELRY company. So, it seems that if the "industry insiders" are to be believed, she did what she was asked to do and is now moving to be a “strategic adviser” to Richemont CEO Jerome Lambert, which I suspect is not unlike a duck making the move to l'Orange. And pretty ironic that someone else with (what I am assuming) is pretty much a jewelry background) is being brought in to run the watch brand that was "too" jewelry focused? What the actual f___k?!?

There are, of course, other rumblings about what the real reasons for her departure are. And it does not help that other rumors are starting to swirl about the future of Richemont's other female watch brand CEO. Let's just say it does not do Richemont's and Rupert's claim that they wanted to break the "sapphire crystal" ceiling much good.

Here's the thing, and it's something that the big dogs at Richemont seem to be having a tough time getting their heads around, it takes time to turn things around. As that other great commentator on the watch business, Barry Hearn once opined -

"You can't take a baby and turn it into a teenager overnight, things take time."

And this is the part that I find particularly curious, and almost perverse - there is at least 1(if not 2) layer/s of supervisory management that separates each of the Richemont CEOs from Rupert and ultimately the board.  So if these CEOs are failing so dramatically, what does that say about the guy who is supposed to be managing them?  We shall wait and we shall see.

The Hunger Games, Part the Second

I'm sure you've already read about it, but to confirm -
Georges Kern has "dropped his letter" at Richemont HQ.

Unlike many resignations and appointments, the news braking this Bastille Day has taken a lot of us by surprise, including me.  But when you spool it out and look at it in its (current) entirety, the pieces do fit together rather nicely.

Courtesy of tick-talk time

So let's start at the beginning with the announcement put out earlier today from (I suspect) a very harried PR department:

Richemont announces resignation of Head of Watchmaking, Marketing and Digital
 
14 July 2017

Richemont regrets to announce the resignation with immediate effect of Mr Georges Kern. Mr Kern was Head of Watchmaking, Marketing and Digital. He has stepped down from the Senior Executive Committee and the Group Management Committee and will no longer be standing for election to the Board of Directors of Compagnie Financière Richemont SA at the forthcoming annual general meeting of shareholders.

Commenting on Mr Kern's decision, Mr Johann Rupert, Chairman, said:

Quote
Georges has been offered an interesting opportunity to become an entrepreneur.
He has had a very successful career at IWC Schaffhausen and we wish him well.
Unquote

Richemont's watchmaking, marketing and digital activities will report to the Senior Executive Committee.

But there is, it would seem, another twist in the tale.  Later in the day it was intimated (albeit not by anyone willing to go officially on the record) that Mr. Kern would be taking control of another testosterone fueled brand, Breitling.  This reporting came from the folks at Le Temps.  Attempts to get either confirmation or denial from Mr. Kern were apparently unsuccessful as of this morning (Swiss time).

Okay, so that's the obviously knowable, but let's dig into the context.  Mr. Kern did a very good job with IWC, and I suspect that in the palace court that is Richemont HQ, there has been more than a little jockeying for position.  With the announcement of a "twin towers" approach which resulted in booting both Mr. Kern and Mr. Lambert upstairs into Richemont's newly re-jiggered corporate structure, it seemed that the one who could be the most Machiavellian would probably emerge as the CEO of the entire Richemont group.  And very often when you have two people who want the same thing, it can very rapidly become a war of attrition.

The other thing to consider is what Charles Horton Cooley termed the Looking Glass Self.  Essentially, that the way we view and value ourselves is, more often than not, a reflection of how we feel we are perceived by others.   When you have been at the forefront of a fairly successful brand, it can be a bit of a let-down to no longer be the face of that brand.   Being in charge of several brands gives you status for sure, but it is not nearly as sexy as the red carpet.  Breitling has historically been ready, willing and able to throw money around and pursue celebrity "chums".  And in fairness to Mr. Kern, he does posses a gift for the "grip and grin".

It is important to really understand that although this news is "breaking" for the rest of us, this was clearly put in motion some time ago.  From time to time impulsive decisions are made in the heat of passion, but I do not think this is one of those times.  This has clearly been building, and more than likely Mr. Kern was just looking for the best possible sortie (and that would be the French definition).

So if the reports are true, and Mr. Kern is on his way to Grenchen, then it marks an interesting step in his career.  As to the "entrepreneurial" aspect of this step, it is also unclear as to whether Mr. Kern raided his piggy bank or whether he was granted some equity in exchange for taking on the challenge.  

My only request would be that he remove the fighter jet from the Grenchen roundabout just off the highway... it's an eyesore.

 

Here's To The Crazy Ones...

One of the great privileges of writing about the watch industry is you get to meet some genuinely nice and interesting people who are working to create a brand, maintain one, or in some cases?  Bring it back from the dead. 

These are folks that have never sought out the spotlight.  They come in early, they stay late.  They answer the phone when a call comes in.  These are the people you don't read about, you don't see them on the red carpet.  But they are there.

These are also the people that, had they been dealt a better hand at the big poker game?  Or (if we are honest) had a more mercenary approach?  They'd be running "big boy" brands, rolling in cash and swimming in champagne.  

These are also guys and gals that tend to do whatever it takes to ensure that even in bad times, employees will be taken care of.  But these are also the folks that when they put down their chips and place their bets?  They tend to do it with their own money first.

I have a great, great deal of admiration and respect for these brand owners.  It is no small feat to be a mid-level director or employee for a watch brand.  I do not make light of that.  But to gain that experience, then to find a struggling brand, put your money on the table to buy it, and make a go of not just running it, but saving it from certain extinction?  That's some pretty salty stuff!

I realize that these are not the people you will be seeing at the GPHG, they will not be featured by the "elite" watch journalists because, well, it's not like they are going to spend any REAL advertising money, are they?

And that is why it really sucks when despite all of the effort, the reality of the business steps in.  Even with their best efforts, new investors coming in, a LOT of enthusiastic customers and potential customers out there, they just can't make a go of it.

With the big boy brands and the big boy egos involved in this business, I talk a lot about the "Transfer Window".  This is mostly due to the way that the industry has hyped up the image of being the CEO of a watch brand to similar levels of being a professional football player.  Seriously - have you ever seen a consumer magazine for toothpaste?  We all use toothpaste (hopefully) but it doesn't tend to lend itself to the passion and fan worship that exists out there for the leaders of the watch industry.  

But there is a parallel watch industry reality.  One where brand owners and CEOs are not worried about finding a new car partner so that they can have a sexier company car, or making enough in bonus to finally pay off their third home in the south of France.  This parallel watch world is filled with normal people, leading normal lives.  People working hard trying to make a dream come true without the benefit of multi-million dollar investment funds.  People pursuing what in then end turns out to be an unfulfilled dream.

But I hope that some of these dreamers that have been "transferred out" will dust themselves off and get back in the game.  This is a business that can lead to some extremely cynical behavior on every side of the BaselWorld booth.  Trust is hard to come by, and motives are frequently questioned and doubted.  The industry needs some more dreamers, and a few less egos. 

I'd like to leave you this morning with a quote from Steve Jobs that is often re-shared by my friend Rod Hess:

Here's to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes... the ones who see things differently -- they're not fond of rules... You can quote them, disagree with them, glorify or vilify them, but the only thing you can't do is ignore them because they change things... they push the human race forward, and while some may see them as the crazy ones, we see genius, because the ones who are crazy enough to think that they can change the world, are the ones who do.

Steve Jobs

 

The Transfer Window Opens - and the Sapphire Crystal Ceiling is Broken!

As my Great Grandfather (Big) Jim Henderson said once or twice - It's a pretty bad wind that doesn't blow someone some good.  Yes, four well-paid, well-fed white men have lost their jobs.  And given the fact that many former lower level employees of these companies have bigger problems than having to postpone the redecorating of their vacation villas, not tons of tears are being shed.  Most of Richemont's brands have been sucking it for some time.  That's just the plain truth.

These changes had been in the wind for some time, and interesting to relate that two of these "retirees" are being kept on in some sort of sweetheart capacity to be "Non Executive Presidents" (sit in the corner, collect your paycheck).  I am sure that unemployed watch makers will feel all warm and fuzzy as they are out looking for new jobs and can't afford to do the normal things for their families.

But let's get back to the good news portion - in the wake of Messrs Cardinali, Torres, Riedo and Leopold-Metzger vacating their positions - someone decidedly NOT male is taking the wheel at Piaget -
Chabi Nouri will be assuming the lead role!

Courtesy of Piaget

And I will be really honest here - I sincerely hope she is wildly successful, and if so, that it will FINALLY usher in an era of women at the head of big brands. 

Let's hope so!

Where's the Love?

So it is now clear that the shot callers at Richemont, and the people that they employ have recognized that they have a fundamental difference of opinion regarding how they should work together to improve the financial situation of the group.

Richemont believes that jobs should be cut.  Oh, and instead of trimming the executive levels, they should increase them by shifting the current CEOs into even higher level (most likely higher paying) positions and replace them with new CEOs which will (you guessed it) increase the amount of payroll and benefits directed towards senior level management.

The people who do the actual heavy lifting have a different perspective - maybe they could go to part time / reduced schedules, hang on to their jobs, and work TOGETHER to try and improve the very awful situation that the very people getting promoted are actually responsible for.

Today the rubber hit the road as the UNIA labor union reported in their newsletter that approximately 700 watch makers in the Vallée de Joux and Geneva protested against what appears to be a nearly terminal case of "Greedy Bastarditis".  Here is a link to the article -

UNIA

"Our lives count more than your profit!"
That was the rallying cry of those protesting, and it signals what an industry insider shared with me was a truly unique moment in the history of the Swiss watch industry.  Typically, the employees would cave, accept the situation and move on.  But in my personal opinion, I think that the people who are being expected to pay the freight on the excesses, miscalculations, and failures of the people now being promoted have finally had enough and are calling BULLSHIT.  The emperor is running around "starkers" and it's time to work TOGETHER to try and find a reasonable solution.

Again, I am sure nobody at the upper levels of Richemont or UNIA are likely reading this, but I am a qualified mediator, and I'd be happy to help you guys work it out ; )

 

 

The 700 Club and Chômage Technique

So today, I got a bit of a French language primer on a wonderfully malleable expression - chômage technique.  Simply put, a "technical layoff". 

This phrase was brought to my attention in discussing the current situation brewing at Richemont - most specifically with Vacheron and Piaget.  As is already known Richemont intends to let 211 people go.  That is at least the latest number that is being bandied about, so depending on whether or not you took the over or the under you might have won the office pool on this one.

The union officials (UNIA) had a less than 100% successful meeting with the employee representatives from Piaget and Vacheron.  Rather than going gently into that good night, over 700 of the potentially impacted employees have pushed back, not accepting the restructuring plan put forward by the very people who guided their brands in the shit that they are currently in.

If your French is good, here is an article from the Tribune deGeneve for some background.  Otherwise call on St. Google for a translation ; ) Tribune deGeneve

I am not privy to all of the details, nor am I even remotely an expert on US labor law and policies let alone those that govern Switzerland, but as it has been explained to me, the best case scenario for some of these folks is a massive reduction in their working hours and even with their under / unemployment benefits they will be making 30% less than what they normally would.  So it looks like little Heidi is not going to be getting those new skis for Christmas.  I kid a little, but try to imagine making 30% less than what you do now.  And these are not the people making hundreds of thousands of CHF per year.  These are normal working moms and dads with kids, mortgages, lives.  These folks are never on the red carpet, flying to Hong Kong, Beverly Hills or Paris for glamorous events.  They come into work at 6:30 in the AM, they work hard, and then to go home to take care of their families.  They are not worried about how to arrange a watch/car partnership with an exotic car company so that they can have an even nicer Italian or German sports coupe.  They are setting aside money to repair their SEAT, Fiat or Peugeot.  Or as another colleague described it to me, at the top it is champagne and filet mignon, and for these folks losing their jobs it's going to be a lot of potatoes and (if they are lucky) a bit of raclette to go with it.  I know that life is, by its very nature, not fair.  But this only serves to illustrate that accountability is not really a "shared" idea.

So at a time where Messrs. Lambert and Kern are getting job upgrades, and other young executives are moving into even higher profile / higher paying roles at Richemont, it seems that the people picking up the tab for what most other industries would consider a failure of management and leadership are the little guys and girls doing the actual work.

It's sort of a messed up message:

We have multi million dollar marketing and advertising budgets, we spend lavishly, our leadership continues to be promoted even though our sales are declining each month.  But don't worry, we have the solution!  We will make cuts to the people who actually make our products.

I would like to leave you with some words from one of my favorite commentators on the watch industry - Gordon Gekko.  This is from Wall Street, and this is his famous speech at the shareholder's meeting of Teldar Paper.  It is fiction, of course, but is something that maybe some brave shareholder should be saying at the next Richemont shareholder's meeting.

Well, ladies and gentlemen, we're not here to indulge in fantasy, but in political and economic reality. America, America has become a second-rate power. Its trade deficit and its fiscal deficit are at nightmare proportions. Now, in the days of the free market, when our country was a top industrial power, there was accountability to the stockholder. The Carnegies, the Mellons, the men that built this great industrial empire, made sure of it because it was their money at stake. Today, management has no stake in the company!

All together, these men sitting up here [Teldar management] own less than 3 percent of the company. And where does Mr. Cromwell put his million-dollar salary? Not in Teldar stock; he owns less than 1 percent.

And you are all being royally screwed over by these, these bureaucrats, with their steak lunches, their hunting and fishing trips, their corporate jets and golden parachutes.

Teldar Paper, Mr. Cromwell, Teldar Paper has 33 different vice presidents, each earning over 200 thousand dollars a year. Now, I have spent the last two months analyzing what all these guys do, and I still can't figure it out. One thing I do know is that our paper company lost 110 million dollars last year, and I'll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents.

  

So Mr. Rupert, in the very highly unlikely event that you might ever read this, maybe it's time to hold senior leadership accountable.  Richemont's watch division didn't get to this place overnight.  And it wasn't the people who are now losing their jobs that got the brands to where they are.  These are people following the directives of their managers and directors.  They may not be sexy, and they certainly don't get written about often enough, but they are your real assets.

Winter Is Coming and the Curse of Baskin-Robbins

The news finally broke to the public that things at Richemont are, indeed, bad.

It was reported in several outlets, but the bottom line is that Richemont announced that, in fact, Winter is indeed coming.

Now what many people have seen coming for quite some time is what these same people were avoiding talking about.  The word around the campfire back at the turn of the year was that Piaget and Vacheron were both sucking wind.  And Piaget's response to that was to damn the torpedoes and push forward with an unfortunately underwhelming reload of the Polo.  The launch event no doubt cost a pretty penny, it was poorly executed and the biggest buzz that came out of it was not about the watch, or the celebrity "Game Changers", but rather the stifling heat, the delayed start, and what many writers referred to as privation and fear of dehydration.

Vacheron, a beautiful and wonderful brand is struggling as well, and so according to the folks at the  Unia trade union those are the two brands that are going to be wearing the prom dress.  

But in fact, if we are honest with ourselves, the problems at Richemont are a lot deeper than anyone is willing to talk about.  And they go far beyond the need to cut bait with some investment properties in Paris.  In the spirit of that other great "eye poker" Gregory Pons, here is a reality check supplied with some suggestions.

Now I want to be clear that several of these observations and suggestions were mined over lengthy conversations with my fellow road-dogs in the industry.  So these are not merely fanboy, media postulations.  I have actually sat on the other side of the table at BaselWorld, made forecasts and dealt with strong arm tactics from idiot sons with Napoleon complexes as the biggest watch retailers in LA.  I've been to the city and I've seen the rodeo.  And when I talk with my fellow watch dogs, it is not as the press.  So here's a cold cup of coffee.

Or in the case of Panerai, espresso.
Panerai should have sales like Rolex.  There, I've said it.  Panerai could sell a hell of a lot more watches.  But Panerai has tragically forgotten who or what Panerai is.  Panerai is not tourbillons.  Panerai is not 19 in house hand-wound movements and 13 self-winding movements.  And those are just the in house ones?!?  Back when dinosaurs roamed the earth, that would be 2003, I spent some time selling watches at Tourneau.  And as history will bear out, Panerai did not have 31 different references.  Baskin-Robbins, on their best day couldn't muster all 31 flavors!  Panerai had two versions, and your options were limited to that, maybe a hand wound, maybe an automatic.  Finding a Panerai in the wild was exciting, and finding one in an actual watch store was a bit like the "little red haired girl" saying yes to a date with Charlie Brown.  Panerai was, in the words of my recently adopted hometown - "wicked hot"!

What happened?  Ego, greed and bad decisions.

So Panerai, here are my suggestions:
1.  You need 31 references like Baskin-Robbins needs 32 flavors.
2.  Scarcity fuels desire, desire fuels purchase
3.  Cut back on the regattas - I've spent time in yacht clubs and I grew up as the "hired help" in a country club.  Interesting factoid - some of the cheapest people you will ever meet.  They are not your customers.
4.  Cull the herd.  Sorry, sounds harsh, but you have boutiques that have 5 different models.  Think about that - you have a Panerai boutique and it has fewer watches than regular retail stores?!?  You need a boutique in Florence, maybe in Zurich, Tokyo and NYC.  The rest of it? That is, believe it or not, what your retail partners are for.
5.  Take a step back and remember what it was that made you so "wicked hot" 

And I am available (as are my colleagues) if you need some unbiased, straight talk ; )

The Transfer Window Opens at Kering

Stepping into some very big shoes, it was announced today that Antonio Calce will take the helm at Sowind.

Courtesy of Kering

Here is the announcement, straight from the source -


Antonio Calce is appointed Chief Executive Officer of Sowind Group
Kering today announces the appointment of Antonio Calce as Chief Executive Officer of Sowind
Group, effective immediately. He will report to Albert Bensoussan, CEO of Kering’s ‘Luxury –
Watches & Jewelry’ division.

As part of his new role, Antonio Calce will supervise the management of the brands Girard-Perregaux and JEANRICHARD, both parts of the Sowind Group, as well as its manufacturing
activities.

Albert Bensoussan, CEO of Kering’s ‘Luxury – Watches & Jewellery’ division, declared: “I am
delighted to welcome Antonio at Sowind and within the Kering group today. His extensive
experience in the Haute Horlogerie and in the luxury watches sector and his deep knowledge of
its industrial and commercial stakes, will allow him to fully support the brands’ growth on
international markets”.

About Antonio Calce
Antonio Calce, an Italian national, started his career within the Richemont group in 1994 as head of the technical department of Manufacture Piaget, before moving to product management responsibilities. In 2001, he was appointed director of operations and product development for Panerai. In 2005, Calce  moved on to Montres Corum, where he was successively appointed Vice President of Operations and Chief Executive Officer. Antonio Calce holds degrees in microtechnology and management studies.