In 2015, entrepeneur Elizabeth Holmes had an estimated net worth of $4.5 billion. On January 3, 2022, she was found guilty of fraud. In the interim, her net worth was reestimated as zero. One of the most important lessons from the Holmes saga is that falsified data can open the spigot to great riches. A whistleblower testified that Holmes' company manipulated data in order to pass certain tests. We can't lose track of the fact that a spreadsheet always begins empty, and the process whereby that spreadsheet is filled is just as important as the entries in the cells.
This month, news broke of a LuxeConsult / Morgan Stanley (hereafter LM) report purporting to describe the state of the luxury watchmaking industry in 2021. It generated a lot of attention. I was a bit bothered by the published pie charts and tables, though. I could not find a copy of the report anywhere. Moreover, the authors assert very specific revenue figures for Rolex, whose secrecy is the stuff of legend. I just couldn't figure out how the "spreadsheet" behind this report was built, which gave me great pause.
I'm not a fan of believing numbers when I can not understand the methodology behind them. My own analysis of the report suggests it is inconsistent with a financial statement from a Swiss watch group which was audited by a third party. It also seems inconsistent with numbers reported by both a trade association and the Swiss government. I will explain.
First, the major headline from the LM report was that, in 2021, Rolex had a 28.8% market share with sales of CHF 8,050 million. From this, we can deduce the report's implied claim for the watch industy's total sales. Let's call this total sales number x. The report implicitly states that 8,050 / x = .288. Solving for x, we get CHF 27,951 million. Here is where the data story starts to fall apart.
According to industry group Federation of the Swiss Watch Industry FH, total watch exports from Switzerland were CHF 22,297 million in 2021. If the LM report is believed, buyers in Switzerland must have bought CHF 5,654 million in Swiss watches. This is the total global sales alleged by LM minus the amount of Swiss watch production exported according to FH. Total sales in the top two markets for Swiss watches, the United States and China, was CHF 6,045 million. I find it hard to believe that a small country like Switzerland, with a population of roughly 8.6 million, bought almost the same amount of watches as two countries with a population totaling 1.4 billion.
Let's look at it another way: in 2019 (the last year for which statistics are available), Swiss authorities report that households spent CHF 14.03, on average, on jewelry and watches per month. There are roughly 3.9 million Swiss households. This implies that their annual spending on jewelry and watches was CHF 656 million. That is nowhere near the CHF 5,000+ million of purchasing they would have to carry out if the LM number were accurate. It is very unlikely that Swiss households increased their watch expenditures by more than a factor of ten between 2019 and 2021. This is strike one against the LM report
Let's next turn to the Swatch Group's annual financial report. Their audited financial statement indicates that the group sold CHF 7,014 million of watches in 2021. The published LM report lists market shares for some major brands owned by the Swatch Group: Omega, Longines, Tissot, and Breguet. The market share for these companies, according to the report, is 17.2%. Using the (probably erroneous) total sales number described above, this implies Swatch Group sales of CHF 4,745 million, which is roughly 2/3 of the watch sales reported by the Swatch Group. Granted, there is 20.5% of the market attributed to "Others" in the LM report. I suppose it is possible that Swatch Group's portion of this 20.5% will harmonize the two figures, but I highly doubt it, especially given the "strike one" described above.
In summary, trade statistics, Swiss authorities, and audited financial staements from the Swatch Group contradict a watch industry report that is not publicly available. Without compelling argumentation from LuxeConsult / Morgan Stanley, it is not advisable to accept their claims regarding the watch industry in 2021.
Last week, Icebox / Swiss Watches GA, a third party retailer of pre-owned watches, officially acknowledged receipt of a lawsuit filed by Rolex USA in the US District Court for the Northern District of Georgia - Atlanta Division. A screenshot of the Icebox / Swiss Watches GA retail location Source: Rolex's legal filing. The cause of action for Rolex's lawsuit against Icebox / Swiss Watches GA is "Trademark Counterfeiting, Trademark Infringement, False Advertising, Designation of Origin, Descriptions, Representations, and Unfair Competition." I've previously covered lawsuits of this sort filed by Rolex against independent retailers who sell modified watches. But this one is an order of magnitude different. Icebox / Swiss Watches GA has some very high-profile clientele. For example, a YouTube video from five years ago entitled "Post Malone Buys Rolex For 21 Savage & Autographs A Bugatti!" has over seven million views (the video content is pretty ...
We're certainly not suffering from a shortage of coverage when it comes to Rolex's recent launch of an entirely new product line: the Land-Dweller reference 127334 (steel, there are also precious metal versions). I've read much of this coverage and I will do my best not to repeat it here. Instead, I hope to share a few takes that you may not have seen elsewhere, including evidence that the watch's design heritage extends in directions that are overlooked. So let's get into it. To begin, the Land-Dweller is undoubtedly attributable to the leadership of CEO Jean-Frédéric Dufour, who took the reigns of the brand in the summer of 2015. According to an expose by Bloomberg (more on that later), development of the Land-Dweller began roughly five years ago, a handful of years after Dufour took over. There have been many, equally significant releases by Rolex of late. For example, 2023's "emoji" Day-Date was arguably a bigger "mic drop" than the Lan...
I recently learned that the CEO of Audemars Piguet Americas (APA), Ginny Wright, was departing the legendary watch brand. A tabletop model of the AP "Starwheel," photo taken at AP House NYC. The new CEO of AP Americaa will be Louis-Gabriel Fichet, who joined AP in 2020. I learned about this development from an online watch publication whose editor opined on the matter . I feel obliged to respond to that piece because I think it reveals some concerning biases in watch industry coverage, biases which will only diminish if we talk about them openly and honestly. There were three critiques of Ms. Wright's time at the helm of APA that jumped out to me. First was the allegation that Ms. Wright suffered a "sudden removal." Subsequent to this critique, Ms. Wright posted on her Instagram account that she is "returning to the world of prestige beauty and stepping into a global CEO role." Moving from a regional executive position to a global one is not ind...
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