Brian Duffy is not a virologist, a soothsayer or a man with a hotline to leaders of government in the United States or UK. He is a man watching the news and the statistics of the Coronavirus pandemic along with the rest of us.
As chief executive of the $1 billion The Watches of Switzerland Group, his decisions do have more impact on a larger workforce than most, so it is insightful to hear that his working hypothesis today is that the group’s stores will be open again by the end of June.
That day cannot come soon enough for a business operating over 140 stores from prime locations in some of the most expensive cities in the world: London (including its major airports), New York, Miami and Las Vegas are homes to vast showrooms, all of which are expected to be closed for the whole of this quarter.
Online sales over the past year have amounted to $80 million, almost entirely in the UK. There may be sales by other means since the group can work its way through waiting lists if it has any product available, but the likelihood is that sales are down by around 90% in the weeks since the lock down began.
Store closures, which began in the US on March 19 and in the UK on March 23, have affected the full 2020 financial year that ends on April 27, but the advice given on March 26 was that sales would end the year in the range of £809 million to £812 million — almost exactly $1 billion.
The statement adds that the group has a strong balance sheet (1.2x adjusted net debt/EBITDA as at 15 March 2020) and significant financial headroom and liquidity. “These facilities and the actions implemented would enable the Group to manage through a prolonged period of store closures,” it continues.
Mr Duffy says in the Watchonista interview what the WOSG team is coping well with working from home, although he was not asked how many of its more than 2,500 employees have been made redundant, taken pay cuts or been furloughed.
The focus is on training the teams to be fighting fit when the doors re-open because Mr Duffy is expecting sales to bounce back. “We think there is big pent-up demand. We went into this situation with demand for watches from certain brands [Rolex, Patek Philippe, Audemars Piguet] exceeding supply, and we think we will emerge with demand exceeding supply,” he explains.
It is also working on launching an ecommerce site in the United States this summer, and is in negotiations with brands on which it will be allowed to sell online.
The second half of 2020 is hard to predict, but Mr Duffy is expecting very little new product this year. Patek Philippe has already said it will postpone its 2020 novelties until next year. Rolex cancelled its launch date of April 20 without giving any guidance on when we might see new models. Omega and Cartier have so far shared very little, and the likes of TAG Heuer and Audemars Piguet already had a fairly limited line-up of launches this year.
“We are going to have a year off of new products,” Mr Duffy predicts. Not only are brands holding back the marketing of new watches because of the Covid-19 pandemic, they are also struggling to make new collections because manufactures are closed or running well below capacity. “Production cuts will prevent new products being made,” Mr Duffy says, adding that brands would typically be manufacturing their new watches at this time of year, so the impact of closures is greatest on novelties.
Mr Duffy believes that the Swiss watch industry will work together to bounce back in 2021. “We will see a spike in new products being launched and a huge marketing push by the big brands,” he anticipates.