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THE BIG INTERVIEW: Aurum Holdings CEO Brian Duffy discusses financial results, going public and opportunities for growth

Aurum Holdings CEO Brian Duffy and Carol Smilie

Aurum Holdings overtook Signet Jewelers to become the biggest watch and jewellery retail group in the UK in 2016. The business then set its sights on the North American market and acquired the Mayors chain of jewellers in Florida last year and luxury watch boutiques at the Wynn Resort in Las Vegas. The group recently announced sales of £685 million for the 2017-18 financial year and appears to be gearing up for a public listing on the London stock exchange in 2019. On the day that the financial results were announced, WatchPro‘s editor Rob Corder spoke to Aurum Holdings chief executive Brian Duffy about its plans for growth, particularly in the United States, and the possibility of going public.

WatchPro: What do you think this year will look like in the UK for your different retail businesses? There appears to have been a slowdown in the first quarter of 2018.

Brian Duffy: The first three months of the calendar year was our fourth quarter, which was a decent performance overall in the UK. Our numbers last year showed really good growth in luxury watches. Other categories were more challenged, particularly the fashion categories. We were quite significantly down in that category both in Watchshop and with the closure of the Goldsmith Boutique stores. The weakness there affected us more proportionately because of the Goldsmith Boutiques and the concentration of that business more online.

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In jewellery we feel did well overall. We were just a tick down year-on-year, but we think that the market was down quite significantly due to a combination of volume reductions and price reductions that are regrettably part of the market, and in which we did not participate. We were tick down, but we think we gained share. We were up very nicely in luxury watches, which now represents 73% of our business; in Q4 it was 75%.

The trends for this year are for this to carry on, other than in jewellery where we have had very positive recent months. In jewellery we are trying as much as we can to be exclusive and not to be competing in the discount-led sector. That is proving to be successful.

WatchPro: Is the jewellery becoming more about working with the right luxury brands like Jenny Packham, Fope, etc.?

Brian Duffy: The two most important jewellery brands are Mappin & Webb and Goldsmiths. We have very much positioned their jewellery lines as brands. We give them great in-store presentation, we support them with advertising — digital and other above the line advertising. We have put a lot of money behind Mappin & Webb, positioning it correctly as a great luxury heritage brand.

Those are our two most important brands, and we complement them with brands that offer something different like Jenny Packham, which is exclusive with us. For Fope and Messika we try to be as regionally exclusive as we can arrange.

Our brands offer fabulous diamond and bridal jewellery. Mappin & Webb jewellery, for example, has been very successful within Goldsmiths stores as we position it as a third party brand.

WatchPro: You have just announced record sales of £685 million for the latest financial year. How much of a contribution has Aurum Holdings’ North American business made to these results?

Brian Duffy: Both Mayors and Wynn have gone exceptionally well; particularly since January the numbers have been very strong from both businesses. We are talking about plus 20s (+20% year-on-year growth), which is very encouraging. We would like to take all the credit for it, but a lot of it is down to a really positive change in the market in the US. We’ve seen that especially for Rolex, but it also applies to Patek Philippe and across the board.

At the next level, and more reassuring in a way, is that our teams have integrated very well. We have worked together as a team on installing systems and putting together our strategies and plans down to a detailed product level. It has been a very positive engagement.

We put all of our systems into Wynn straightaway because we had to when we took over the business from Wynn. Literally, within 48 hours, we had to put in all of our retail systems, security cameras, you name it.

In the case of Mayors, we waited until the year-end because we are putting in the full SAP ERM suite of systems that we use across warehousing, financials, HR, CRM and everything. We did that at the end of April. It took a bit longer and was a lot more invasive, but it has now been done and is supported by everybody. We now have all of our systems the same everywhere in the world, which gives us consistent access to the same information across the group. That is very positive.

Wynn Resort in Las Vegas has become a key destination for Aurum Holdings. The group already runs a large Rolex monobrand store and a multibrand showroom. It is opening two more monobrands, for Omega and Breitling, later this year and re-opening its multibrand as a Watches of Switzerland in November. 

WatchPro: You speak like it was almost a stroke of luck that the US market has turned this year, but it would be harsh not to recognize that you chose the timing for entering the US with the acquisition of Mayors. The timing looks particularly good given that growth in the UK is slowing just as the US is picking up.

Brian Duffy:  We will take credit because we did take the view that the two years leading up to the acquisition were a low point for the sector in the United States. That has turned out to be right. We did not quite predict that the upturn would kick in on January 1 this year, but we were confident that the US market would show nice growth in the near future and baked that into our thinking.

The market had been affected by a loss of tourism and an expansion of the grey market. The loss of tourism, we thought, was not going to get any worse, and the grey market we knew would be limited by a curtailing of supply on a global basis thanks to a lot of great work by the brands buying back stock, limiting distribution and cracking down on errant retailers. That was having a significant detrimental effect on full price sales in the United States, and we predicted this situation would improve.

WatchPro: In the UK you invested millions into a building and refurbishment phase over the past five years that dramatically increased your market share once it was complete. Are you going to invest in a similar way in the United States?

Brian Duffy: Our biggest growth has come from investment in the existing estate of Aurum. Buying Watchshop was our only meaningful acquisition. The rest of it came from investing in our own stores and expanding the base, the best example being the golden triangle of Watches of Switzerland stores in Central London where we took three fairly modest shops and turned them into global flagships.

We really believe that those flagship-style stores are what consumers want today. They give great choice, great customer service, great environment — the legendary Aurum customer service and provided in a luxury environment. That is all supported by digital activity in all its forms including ecommerce, which is going very well for us, plus our CRM system and social media reach out. We know today that our consumers do a lot of research online and come into the stores very well informed. When they start this research online, they can’t miss us because we are very, very visible.

We think we have the formula that has worked very well in the UK, and with the support of our shareholder Apollo Global Management, we have a blue print for investment and expansion in America.

WatchPro: Switzerland’s biggest family-owned jeweller Bucherer bought Watch Gallery in the UK and Tourneau in the United States last year. How do you think competition from Bucherer will affect Aurum?

Brian Duffy: A strong player like Bucherer setting high standards is a good thing and we welcome it.

Bucherer is clearly a very good group that has been around for a very long time. They have a dominant position in Switzerland. Overall we welcome the investment they are making in the market, we all benefit in the UK from the consistency and quality of presentation in both London and regionally. The strength of the UK is that there is a great mix of high quality retailers. We have us as the biggest player, we have Harrods, we have Bucherer in Selfridges and elsewhere, and we have really high quality independents. As each of the big players set a standard in what we do then the whole market has to respond, which is what has led to this really consistent high quality of presentation that makes the UK the best market in the world.

The big opportunity in the US is that there has not been a significant market leader investing at anything like the same level. There are a lot of really high quality independents and regional groups, but nobody has been doing the flagship-quality luxury stores that we have been doing.

You now have us, and we will be following exactly the same blueprint for luxury positioning and growth in the US, and you will see Bucherer doing exactly the same thing with their acquisition of Tourneau.

We think that between what we have acquired with Mayors, our Wynn business and what we have planned in New York, we are more or less the same size as Tourneau.

We very much like what we have acquired. Mayors is very familiar to us. It has performed consistently well over many years. They have a great concentration and leading market share in their core territory of Florida and Atlanta. They have a fabulous team in the headquarters in Fort Lauderdale that has meant we have hit the ground running in America.

I do not think we would have been able to move at the pace we are in Las Vegas with Wynn, with the New York projects, or other things we are planning with Wynn if we did not have the security of this great Mayors head office. We are very happy with the configuration we have in the US.

WatchPro: High quality competition will put pressure on margins, not least because so much money has to be invested in new stores and refurbishments in order to stay ahead of competitors as strong as Bucherer. If Aurum and Bucherer are competing for leadership in key markets such as Las Vegas, New York, Florida and California, will that mean investment running ahead of sales growth?

Brian Duffy: We regard the whole US market as being under-developed because there has not been the level of investment that the brands merit, and the consumer will respond to that investment as it goes in. I think we are in a pretty complementary position with Tourneau. One will add to the momentum of the other because it will be a big investment in the category and luxury watches appeal very much to the American psyche. They have great value retention, they are family heirlooms, they are symbols of success and celebrate important moments in life. We think the whole industry should be selling more watches and we think they will with the right investment. We are not concerned we will be fighting over an existing cake size, we are going to be making the cake much bigger.

WatchPro: Is there any information about the exit plan for Apollo? There has been talk of bankers being appointed to handle a public offering next year.

Brian Duffy: Nothing official. It is no surprise, since we went through the same process last year, that Apollo has been looking at market developments and considering what might be the best next steps, but they have not formally decided anything at this stage.

Since this interview, Aurum Holdings, which will change its name to The Watches of Switzerland Group on September 1, has appointed Dennis Millard as chairman. Mr Millard’s appointment apears to fit with a timetable for the group to go public on the London Stock Exchange in 2019 as he has considerable experience working with publicly listed and private equity-backed retail groups. He is currently a non-executive director at Superdry Plc and deputy chairman and non-executive director at Pets at Home Group Plc. He has also served full terms as chairman of Halfords Group Plc and Connect Group Plc (formerly Smiths News Plc) and was a non-executive director at Debenhams Plc, Premier Farnell Plc and Xchanging Plc. He has been CFO of a range of businesses including Cookson Group Plc and London and New York listed international pharmaceutical group, Medeva Plc.

WatchPro: How do the next 6-12 months look?

Brian Duffy: The Soho store is on schedule to open in November. We will be opening two stores in Las Vegas: a monobrand for Omega and another one for Breitling. Both of those open in November in Wynn. We love everything about Wynn. The current multi-brand in Wynn will move across to the other side of the passageway to be next to Rolex. That will be a spectacular Watches of Switzerland store, also opening in November. It looks like we will open Watches of Switzerland in New York, with the Soho store, and in Wynn in the same week in November, and we will be putting significant advertising behind those. We will be coordinating our marketing activities.

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Rob Corder

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