Movado Group had been courting Olivia Burton for almost a year before the deal to acquire the London-based watchmaker for £60 million was signed in June. In their first interview since the takeover was announced, WatchPro spoke to Olivia Burton co-founders Lesa Bennett and Jemma Fennings, and Movado Group CEO Efraim Grinberg, about plans to take the brand global while preserving the passion and creativity that has brought it so much success.
The market for watches priced at under £500 has been brutal for the past two years. In 2016, alone, sales in the UK fell by almost 13% in value, and for the first six months of 2017, the price segment is down 9.7% compared to the same period in 2016, retail analyst GfK reports.
It is all the more remarkable then that Olivia Burton, the fashion watch brand created in the East End of London in 2011, has not only survived in this hostile environment, but thrived. In its latest fiscal year ending March 31, 2017, Olivia Burton’s revenue increased 64% to approximately £15m. It is forecasting sales of £25m for the current financial year. At an average retail price of around £100 per watch, that is a lot of units.
The business currently employs 33 staff at its Shoreditch head office and its watches and jewellery are sold through leading UK retailers, including John Lewis, Watchshop, Argento, Selfridges and Beaverbrooks. In addition, for the past year, Olivia Burton watches and jewellery has been sold by Nordstrom, a major national department store chain in the US that has 117 stores.
What’s more, while rivals from major groups ploughed money into advertising in an effort to shore up demand, Olivia Burton has continued to grow without spending a penny. “We have been really successful in terms of creating a brand with no marketing budget at all. It is worth highlighting that all of our success to date has been achieved with zero marketing budget. We have not ploughed loads of money into social advertising. Everything has been organic and natural. Now we are so excited about where we can take the brand with marketing spend behind it,” says Olivia Burton co-founder Lesa Bennett.
Mastering social media in its early years gave a dramatic lift to Daniel Wellington watches as well. But, while Daniel Wellington’s growth has slowed over the past 18 months, Olivia Burton has accelerated. Evolution of its watch designs is one key to these differing fortunes. Olivia Burton founders Ms Bennett and Jemma Fennings both come from a fashion background (Ms Bennett was a fashion watch buyer at ASOS for four years), and the pair understood the need for fashion watch designs to evolve at a much faster pace than the once-per-year launches of traditional watchmakers.
The company now has four drops per year, allowing watch collections to pick up on seasonal trends — often driven by colours and images inspired by the natural world. These seasonal changes are also carried through Olivia Burton’s communications and merchandising, helping it to tell stories that are relevant and fresh. “As a brand we have always been at the forefront, whether that is innovating on new products or looking at exciting ways we can develop our point of sale and deliver that brand theatre. That is something that we have been exceptional at and it has set us apart from our competition,” Ms Fennings describes.
It is important to understand the competitive landscape around Olivia Burton, particularly when it comes to calculating how Movado Group came up with a valuation of £60 million for the business. The parent company of Olivia Burton, JLB Brands, has not disclosed its profit figure for its most recent financial year, but a fast-growing company with turnover of £15 million is unlikely to have generated margins much above 10%. Even a 20% margin would have generated a profit of just £3 million, which would make Movado’s acquisition price a multiple of 20 times its annual profit. More likely the multiple will have been much higher.
That is a pretty tasty price, even if Olivia Burton is dramatically outperforming a moribund market for fashion watches. If Movado Group CEO Efraim Grinberg has any doubts about the valuation, he isn’t showing it. As head of a $600 million publicly listed company, Mr Grinberg is approached all the time by watch brands wanting to be bought, but he has only had eyes for Olivia Burton for the past year.
“The level of creativity in the product is amazing, as has been the brand and the DNA that Lesa and Jemma have built. I get offered watch companies to buy all the time and a lot of these new start-ups that are out there have been offered to us. But this is the only one that I was interested in and instead of them courting us, I had to court them. I have spent the last year doing that, and I am delighted that we made it happen,” he tells WatchPro.
“In my mind, Olivia Burton is the only brand out there that is truly different. It has a true DNA and a true identity that is expandable into a lifestyle brand. It is almost a collectible, which makes it really special. They have maintained the exclusivity and the luxury element, while it is at an affordable price point that means women can buy their watches themselves or receive them as gifts,” he adds.
Olivia Burton’s fresh approach to ecommerce and social media is also key to Movado, which is facing testing headwinds as the US retail scene adapts to changing consumer behaviour. “Retail is particularly challenging in the US, although the rest of the world is much more stable. The main issue in the US is that there has been a dramatic switch from people shopping in malls to shopping online. That has had a much bigger effect in the United States than in the rest of the world. Part of that is because the US has too many malls and too many stores. Until that consolidates, there will be a reduction in traffic,” Mr Grinberg describes.
The UK has managed the transition from physical stores to ecommerce better, Mr Grinberg believes. “I would say you have a pretty good balance in the UK. What I have seen is that retail is more exciting here in the UK compared to other places likeNew York or Paris. And you are not over-stored, or it seems that way to me. The growth of online business here has been more incremental, rather than being purely cannibalistic,” he adds.
Movado Group, via its UK subsidiary MGS Distribution, has been one of its best performers, and the Olivia Burton acquisition will give it an immediate boost. “The UK has been a strong market for us compared to the rest of the world. It has been an important market for our company. With the acquisition of Olivia Burton, and having Lesa and Jemma on our team, we see an even greater opportunity to grow both in the UK and around the world,” Mr Grinberg predicts.
Acquisitions run the risk of clashing corporate cultures sucking energy out of a business, but Movado Group and Olivia Burton are convinced their values and vision are perfectly aligned. “Movado have been with us here in London for the past few days. The senior team has been here in our offices and it has been immediately clear how well-aligned we are. The passion and the energy has gone through the roof. Everybody here and at Movado is just super-excited about what the future will bring,” Ms Fennings reveals.
Movado wasn’t the only company that the Olivia Burton team spoke to last year when they were exploring how to take the brand to the next level, but it quickly became apparent to the co-founders that they had found the right fit. “We spoke to lots of different people, and we are just so inspired by and impressed by Efraim’s business. The knowledge and experience as well as the infrastructure and the network that Movado Group has is really going to allow Olivia Burton to fulfil its potential and flourish in the future,” Ms Bennet says.
“Jemma and I initially looked at options including corporate finance in order to help us grow the company for the next few years. But we were really only speaking to Efraim about a full sale because we really believe that this is the best way for the company to grow and fulfil its potential. The option of corporate finance just didn’t bring the experience, the knowledge, the network and the infrastructure that we needed to grow at the speed and with the ease that we could,” she adds.
It is clear speaking to the three business leaders that they are on the same page with a vision. Not only will Movado Group’s infrastructure, finance and global reach help Olivia Burton expand, the expertise of Ms Bennett and Ms Fennings in reaching the millennial and post-millennial generation Y is expected to be harnessed by the whole group. “We bought this business not for its past, but for its future. We believe that its future is even brighter ahead and we believe in the long term of the brand. Its growth has been nurtured rather than taken advantage of, and we are going to continue to nurture that growth and focus on the long term health and sustainability of the business. I am more interested in what this brand is going to be like in 20 years than what it does in the next two weeks,” explains Mr Grinberg.
“We each can learn from each other. We can add some support systems and infrastructure, but Olivia Burton brings a level of engagement and creativity with their consumer that is spectacular. For me, what was as important as getting the brand was getting these two young ladies and their team on board with us. They have a fabulous team here in London and everybody in our company is passionately excited about getting them all on board and working with us,” he adds.
Olivia Burton has always made a virtue of its nimbleness and flexibility, and the company’s founders are reluctant to look too far into the future when WatchPro asks about plans for the next five years.
“We are focusing on watches and jewellery that we have at the moment and turning that into a global brand. That is our short term focus for the next couple of years. We have got a long way to go internationally. We have still go lots of opportunity there. The US is certainly a big focus for us over the next year but equally there are opportunities in Europe and Asia. We have a lot of traffic to our website from Asia, which has given us an indication of the potential there. Plus ecommerce, we want to build on our ecommerce platform and build that as a global service,” Ms Fennings concludes.