After last year’s management buyout of Girard-Perregaux and Ulysse Nardin, CEO Patrick Pruniaux tells Rob Corder how he is playing the long game, rationalising distribution and putting the emphasis on quality over quantity when it comes to watchmaking and retail partners.
WATCHPRO: Today we are speaking specifically about Girard-Perregaux, and not Ulysse Nardin, which you and your collective of brands (Sowind Group) also acquired from Kering Group last year. Just to set the scene, you took over as CEO of Girard-Perregaux in 2018. How was it while it was still under the Kering umbrella?
PATRICK PRUNIAUX: There were clear opportunities to develop the brand. There were very good foundations, particularly with the history of the brand, but also with the teams who were working on the product side.
There was work to be done to adapt to the new reality of the watch industry, in particular when it comes to distribution.
There was a clear need to make Girard-Perregaux stand out for its exclusivity and to explain to new customers what the brand stands for.
Kering played a very important role in that strategy and increasing focus on the brand. There was fundamental work that needed to be done, and Kering was very supportive in that.
WATCHPRO: Kering is a group with a turnover in its 2021 financial year of €17.6 billion, so it had the financial firepower to invest heavily in manufacturing, equipment, team building and more. How much progress was made in the decade GP was owned by the group?
PATRICK PRUNIAUX: A lot was done. Some of it was visible, some was less visible. Kering helped with two main things. First, was to invest in the manufacture, our office and our people. Less visible was the work we did within the group on optimising our distribution.
We halved the number of retail partners. We now work with only the best partners in the world and in prime locations in top stores. Wherever you look, the very best retailers in any territory are working with Girard-Perregaux, which was not the case before.
You have to streamline the operation. If you reduce the number of retailers, you have to buy back stock. After years of work on this, we find ourselves with perfect distribution.
Whichever city in the world you look at, you will find GP with the best retailers and being sold, in most cases, from a high-quality branded environment.
WATCHPRO: You were CEO of Girard-Perregaux for three years while it was within Kering, and the work was clearly started during those years and has continued since you bought the brand, so we are really talking about one continuous process within and outside Kering. Looking more closely at the optimising of distribution, have you been focusing mainly on the biggest retail partners like Bucherer, Watches of Switzerland, The Hour Glass, Wempe and Seddiqi, or are you also committed to working with smaller independents with enormous strength in their local markets?
PATRICK PRUNIAUX: All of the above. I would not define our partners by their size, but by their quality and the way they treat their customers.
In my opinion, there has been a major acceleration in the quality of distribution in the watch industry over the past decade among both independents and the large groups. The retail experience, even in multibrand stores, is much better than it used to be and I have to give credit to all of our partners because they are raising the bar for the entire industry including independents.
As I say, it is not about the size, it is about the quality of the retailers we choose to work with. We work with amazing one-store independent retailers that know Girard-Perregaux and haute horlogerie very well.
WATCHPRO: I have seen brands optimise their distribution before, and it often ends up that only retailers in the biggest world cities survive the process. Have you been mindful that there are great opportunities outside the likes of Tokyo, London, New York, Dubai and Hong Kong?
PATRICK PRUNIAUX: There is certainly a market outside of these cities. It is all about having the skills to explain what Girard-Perregaux stands for and how to talk about our watches.
We have a very long-term strategy now that we are independent. Whatever we do, we tend to think that things need time rather than everything being about immediate ROI. That applies to the retailers and the suppliers we work with. They are all important stakeholders and we want them to share our passion for building the GP brand.
Naturally, we want to do well now, but our mission is to do very well in 15 to 20 years’ time.
WATCHPRO: How much are you able to say about that long-term vision and roadmap? If I look at your starting point, when you took over Girard-Perregaux, there was clearly a lot of work to do but the only way was up. For example, when I look at the annual Morgan Stanley report, Girard-Perregaux is not currently in the top 30 Swiss watchmakers by turnover. That is quite an attractive place to start for new management with a long-term plan.
PATRICK PRUNIAUX: Obviously all rankings can be questioned. There is no doubt among watch collectors that Girard-Perregaux has been a leading haute horlogerie brand for more than two centuries. As an independent brand, we have a very long-term vision and responsibility to continue meeting the level of expectations of our fine watchmaking lovers.
WATCHPRO: Should you be in the top 30? Does the Morgan Stanley report have it wrong?
PATRICK PRUNIAUX: What really matters is that, having acquired Girard-Perregaux, it was clear to me that we really needed to work on its foundations. This is not a brand that was born yesterday and I am a strong believer in maintaining continuity with its past, but it needed work.
We are opening a boutique in Geneva in 2023. There is also going to be one in London. That will give you a much better idea of the consistent look and feel we are moving forward with.
As I mentioned earlier, it needed healthier and higher quality distribution. We need to keep on expressing our values and what we stand for. That has been worked on over the past 18 to 24 months and already we are seeing a very positive response from watch lovers and collectors who appreciate what we are doing.
WATCHPRO: You appear to have already pulled off the ultimate trick in luxury retail, which is to have demand exceeding supply for the Laureato.
PATRICK PRUNIAUX: One indication of desirability — not only for us, but for every brand like ours — is the resale value of our watches. We are happy to see that the resale value of Girard-Perregaux’ iconic collections, not just Laureato but also the Bridges models, has increased.
WATCHPRO: I reported on that phenomenon a couple of months ago. In a comparison of several of the most popular steel sports watches, the Laureato was one of the only models that has seen prices rise slightly since the bubble burst at the end of the first quarter last year.
PATRICK PRUNIAUX: Correct.
WATCHPRO: I agree that prices on the secondary market are only an indicator for the health of watch brands. But, as you said earlier, it is a pretty opaque industry and, for people like me trying to read the tea leaves on which brands are doing well or badly, it is a useful guide.
PATRICK PRUNIAUX: Girard-Perregaux remains one of the strongest of the dozen or so luxury watchmakers with centuries of history. There is a small number of brands that have expertise in high horology and also in core timepieces. We are going to remain one of the most exclusive, so I would not expect to see Girard-Perregaux producing more than 25,000 watches per year.
WATCHPRO: Well, 25,000 sounds pretty ambitious. Given the price point of Girard-Perregaux watches, that would propel you into a whole different league.
PATRICK PRUNIAUX: I would not describe making 25,000 watches as ambitious. Girard-Perregaux is about craftsmanship and high horology and protecting our value and exclusivity.
WATCHPRO: You spoke about the rise in the quality of watch retailers in recent years, and that is obvious for all to see. There have also been some interesting developments from some brands and retailers, which are completely changing the way they operate. The most obvious example is Audemars Piguet, with its AP House concept. What is your view on how retail is evolving and how would you like GP to fit into the ever-changing landscape?
PATRICK PRUNIAUX: The first thing I would say is that our strategy is to continue selling 100% through retailers, whether that is in multibrand stores or franchised boutiques. We believe strongly that retailers are very good at what they do. Our job is to make sure they understand Girard-Perregaux and believe in us.
This approach may seem old-fashioned, but we like that. There is a very strong level of partnership with our retailers and we have great positions with many of our points of sale.
Sometimes we are only second in the way we are treated by our retail partners to the market leader. Very often we will be one of the top three brands with a retailer in terms of space allocated and position. That only happens if we mutually support each other. Having fewer points of sale is an important part of that.
Today, brands have a lot of different strategies when it comes to retail. Some are verticalising their distribution [selling direct to consumer], but that is not our way.
WATCHPRO: It feels important today, in a way that was much less the case five years ago, for brands to have a look and feel at the point of sale that is consistent and identifiable. Customers know when they are in a Breitling, Omega or Patek Philippe boutique by the décor and they get a 360-degree experience. Right now, I cannot conjure up an image of what GP looks like at that point of sale in the same way. Do you think you need a flagship showroom that will define that look and feel, and which can then be adapted for shop-in-shops or franchised boutiques with your partners?
PATRICK PRUNIAUX: You may not have had the chance to visit our latest shop-in-shops? In 2023 we are going to roll out between 40 and 50, which is about 25% of our distribution.
Plus there will be a dozen additional boutiques in top locations. We are opening a boutique in Geneva in 2023. There is also going to be one in London. That will give you a much better idea of the consistent look and feel we are moving forward with.
WATCHPRO: It is so important these days for any brand to have a blockbuster bestseller watch; a platform collection that can come in many forms — three-hander, chronograph, GMT, different materials, colours, etc. GP appears to have precisely that with the Laureato. How central is it to your mission to have this sort of platform collection? I notice it will be the 50th anniversary of the Laureato in 2025, so do you have a plan leading up to that?
PATRICK PRUNIAUX: For sure. The Laureato is clearly a design signature for us, along with the Bridges, which has been a strong mechanical signature for more than 160 years. Laureato is already a success for us, and we will find a way to celebrate that in an anniversary year, but it is really something we celebrate every year in a different way. It is an iconic product.
What is interesting is that Laureato is proving its timelessness. Today I am wearing a green dialled version of the fifth generation of the Laureato that was born in 1975. The collection has evolved, but customers appreciate that it is very consistent over time. That is part of our strategy. We think very long term.
WATCHPRO: Girard-Perregaux currently makes highly respected in-house movements, but you are not a top-to-bottom integrated manufacturer that makes its own components, cases, bracelets, etc. Is the plan to manufacture more of the parts that make up each watch?
PATRICK PRUNIAUX: I do not think so. I want us to be very focused on what we do best, which is to master the production of our movements, and to keep innovating with those movements.
When it comes to the rest of the watch, we work with great local suppliers, some of which are physically next door or elsewhere in La Chaux-de-Fonds or Jura.
These independent companies do their jobs extremely well and they are perfect partners for us. Working with them is a sign of respect for what they do.
It is a bit like the conversation we had about retailers. They are specialists that are incredibly skilled at what they do. We view our suppliers in the same way.
WATCHPRO: We know America has been red hot for two years. Europe has been strong as well but exports to China and Hong Kong have been down ahead of them abandoning their zero covid policies. How do you think the next 12 to 24 months will look?
PATRICK PRUNIAUX: It is very hard to tell. I am a strong believer that the luxury watch industry over the next decade is going to continue to grow very significantly. I am convinced of that because, more than ever, quality watches are appealing to customers.
We see a larger number of customers across the luxury watch industry and we see them collecting more watches. That is a recipe for a flourishing industry over the next decade. The economic situation may be up and down, but over a period of time I am sure the prestige watch industry will grow strongly.
For 2023, as you mention, a lot of things are happening, but we are forecasting robust demand. As we speak in mid-January, I am fairly optimistic.
WATCHPRO: As China opens up, do you think we will see business return to pre-pandemic levels straight away?
PATRICK PRUNIAUX: It may be more like the second half of 2020 [in the West] where the market was extremely dynamic for luxury in general. But we do not know for sure. What I do know is that a brand like Girard-Perregaux, with strong momentum, will capitalise on opportunities that arise.
WATCHPRO: Privately-owned watchmaking companies like Breitling, Richard Mille, Audemars Piguet and of course Rolex and Patek Philippe, have grown faster than equivalent brands within the large watch groups over the past five years. These private companies have many corporate structures, including private equity ownership for the likes of Breitling. You will know better than I do that private equity firms will want a return on their investment and an exit at some point, and that affects the way businesses are run. What is the situation for Girard-Perregaux and Ulysse Nardin since the management buyout? It is run by its owners or is there significant outside investment?
PATRICK PRUNIAUX: No. We invited some investors to join me when I bought the brands, but they are not expecting anything more than for us to execute what we promised, which is decades of strong performance. Our vision is super long term. There is no exit we need to plan for.
A lot is going to happen between now and then, but we will have a much better view of our performance when we look back on it in 15 to 20 years from now. We are already having conversations about what we will do after 2030.
WATCHPRO: The Swiss watch industry had a record-breaking 2022 with exports up 11% to almost CHF 25 billion, thanks largely to average prices rising and the number of watches produced remaining steady after a long-term decline from a peak of 30,000 watches in 2015 to around half that number today. What do you think about that trend for the entire Swiss watch industry, and do you expect to buck the trend?
PATRICK PRUNIAUX: What you describe is true, but it does not really apply to us. Our situation is different. Our production will not exceed 25,000 for Girard-Perregaux. That is a tiny portion of the watches made and sold in the luxury segment, and we are happy with that.