UK financial results for 2020 from the world’s biggest watchmakers and retailers show the devastating effect of the pandemic on businesses that have relied too heavily on tourist spending in central London.
Visit Britain estimates that the country was starved of £57 billion of tourist spending last year across hospitality, experiences and retail. London accounts for around two-thirds of that total loss, according to the Centre for Economics and Business Research.
The impact of London’s losses are seen in the accounts of Swatch Group, LVMH Watches and Jewellery, Rolex and Patek Philippe (Richemont has not yet published its accounts for 2020/21).
Financial results in the UK for the pandemic-ravaged year of 2020 have varied wildly for the world’s biggest watchmakers.
Rolex Watch Company UK sales rose by 13% from £415 million to £468 million in 2020.
LVMH Watch & Jewellery (UK) Ltd, distributor of TAG Heuer, Hublot and Zenith for the UK and Ireland, reported turnover dipping by 8.9% from £96.2 million to £87.6 million for the 12 months to December 31.
Turnover for The Swatch Group UK Limited, distributor and retailer for Omega, Longines, Tissot and all other group brands in the UK and Ireland, dropped by 39% from £180.5 million in 2019 to £110.3 million in 2020.
Patek Philippe’s turnover dropped 42% from £176.4 million to £103.7 million.
On the retailer front, Watches of Switzerland Group reported sales rising 11.7% to £905.1 million for the financial year ending May 2, a period that was book ended by the two mandated closure periods for all its stores.
Bucherer UK Limited —which runs Europe’s largest Rolex store in Knightsbridge, the Wonder Room for watches in Selfridges, plus multibrand showrooms in London’s Covent Garden (which opened in the summer of this year) and Westfields Shopping Centre — saw sales drop by 31% from £97m to £67m.
There are myriad reasons why some businesses managed to increase sales while others suffered declines, but an inescapable truth is that the more reliant they are on central London boutiques selling to overseas visitors, the worse they have performed.
Patek Philippe’s accounts are the most revealing in this regard because, helpfully, they have separate financial results for Rhone Products, the parent organisation responsible for all sales including distribution and retail in the UK, and Patek Philippe Salon Limited, which runs the brand’s only store in the UK on London’s Bond Street.
In 2019, total UK turnover was £176.4 million, of which £66 million was generated by the Bond Street store.
Patek Philippe Salon Limited posted a 66% drop in sales from its Bond Street boutique which implies wholesale revenue for Rhone Products shrunk by a more palatable 28% from £110 million to £80 million in 2020.
In other words, while sales tanked in London for both the Patek Philippe boutique and, I assume, its authorised dealers in the capital (Pragnell, Watches of Switzerland, Mappin & Web, David M Robinson, Boodles, Wempe and Bucherer), Patek Philippe’s network of authorised dealers outside the M25 performed much better.
This is not a surprise since family-owned businesses like Berry’s, Prestons, Pragnell, Laings and Boodles have strong domestic customer bases and demand snapped back almost instantly after stores re-opened. Plus they were nimble and entrepreneurial enough to quickly switched to phone, Whatsapp and e-mail sales while stores were closed.
Although travel restrictions in and out of the UK are now far more relaxed, there are few that anticipate a return to the halcyon days of 2016 to 2019 for central London tourism in the coming year or two.
I was in Selfridges yesterday and there were more customers of Middle Eastern appearance than six months’ ago, but none of the Chinese or other Asian tourists on which the store depends.
Which is why we are starting to see brands work harder outside the capital. Panerai’s new UK brand director Yoann Rodriguez spent his first month in the job touring the country and learning the incredible demand for luxury watches in cities like Glasgow, Manchester, Liverpool and Leeds.
IWC is in the middle of a Big Pilot Roadshow, which presents its latest collections in partnership with authorised dealers across the country.
I was speaking to Hublot CEO Ricarado Guadalupe last week and he admitted the brand had to do better across the country.
This can only be a positive development. If the biggest brands support their authorised dealers across the UK, rather than focusing on trying to make their central London boutiques profitable by, for example, creating boutique-only limited editions, the country will continue to develop as a watch-loving society.
Luxury watches might “sell themselves” to wealthy Chinese customers coming to London with the express intention of buying watches at prices far lower than in their home country, but the industry must not rely on them to return.
Instead, as Charlie Pragnell once told me — passing on a lesson he had been given by his father — tourist spending should be a bonus, not a business plan.
