Den of Thieves 2: Pantera, Tissot, Swatch Group & Richemont

Last month I watched the 'Den of Thieves 2: Pantera'. Here's the Trailer:

I hadn't watched Part 1, but I really enjoyed the movie. At about 0.20 in the trailer is where Gerard Butler (acting as Sheriff Nick O'Brien in the movie) visits his counterparts in France. A short conversation occurs about the correct pronunciation of "croissant" in French, with the "T" silent. The French police attempt an analogy to the English pronunciation of "salmon" with the "L" silent, but Gerard Butler jokes that he pronounces both words without the silent "T" and "L" respectively.

The Wikipedia entry for the movie is at Den of Thieves

The conversation relating to the pronunciation of "croissant" in French stuck in my mind, since I've also spent quite some time perfecting it :)

After the movie, I glanced at my wrist and, sure enough, there was the Tissot Powermatic 80, similar to the one featured below

And, then it struck me: the final "T" is silent in "Tissot" too, so that in French it is pronounced "Ti'So".

I wondered whether Tissot was a company. Wikipedia told me that Tissot was owned by what is now the Swatch Group: Tissot

I was familiar with the Swatch product line but did not know that the Swatch Group also owned a who's-who of other watch brands in addition to Tissot: Blancpain, Breguet, Certina, ETA, Glashütte Original, Hamilton, Harry Winston, Longines, Mido, Omega, and Rado.

Wow!

With brands like these the Swatch Group must be doing very well financially.

So, what was its financial and stock performance like?

This is the 5-year stock performance of The Swatch Group which is listed on the Swiss Stock Exchange and has the ticker symbol "UHR":

So, down by 30.53% over the last 5 years.

Here's the comparison of returns to the MSCI World Index:

And here are some Valuation Measures and Financial Ratios:

Disappointing, much. Wealth-destruction on quite an epic scale.

So, what happened?

News on the Yahoo! Finance website offers some indication: Swatch Group Profits Slump 75% in 2024, dragged down by China and here are some excerpts from the article of January 30, 2025:

1. "Skittish Chinese consumers at home or abroad dragged down the Swatch Group: The Swiss company’s 2024 net income dropped 75 percent to 219 million Swiss francs, or $242 million at current exchange rates. Revenue for the full year came in at 6.74 billion Swiss francs, or $7.43 billion, down 12.2 percent against 2023’s figures at current exchange rates. It came in short of a consensus forecast of 6.98 billion Swiss francs, or $7.7 billion.
2. "In a research note, Bernstein senior analyst Luca Solca described the fiscal year’s results as going 'from bad to worse.' In his opinion, the group’s woes could be attributed as much to 'a depressed global watch market after the post-COVID-19 watch binge' and high exposure to China as to the company maintaining high capacity levels that had an impact on operating leverage and 'an abysmal financial market communication approach.' Solca further called Swatch’s stock “borderline un-investable” given the firm’s lack of clear financial communication, and suggested the company may be taken private.
3. "Swatch Group continued to attribute its decline in sales for the full year to the sharp drop in demand for consumer goods in Greater China, which includes the Hong Kong and Macau special administrative regions, as well as Southeast Asia, due to the drop in Chinese tourists.
4. "Overall, the group stated it saw “record sales and market share gains” in the U.S., Japan, India and the Middle East. Omega, Longines and Tissot grew strongest, with the latter passing the $100 million mark in sales in the U.S. for the first time, Swatch noted."

Here's the Ad hoc announcement from the Swatch Group on the key figures for 2024 and the outlook for 2025.

And the press release with the detailed figures for 2024 is here.

And this from an earlier article of 15 July 2024 - "Swatch H1 Profits Fall 70%":

Similar speculation from Luca Solca on an imminent privatisation and "Meanwhile, the Swiss watch and jewelry group is in the throes of a generational changing of the guard. The company announced in June the retirement of chief controlling officer Peter Steiger, a 35-year veteran of the group; the arrival of Damiano Casafina, chief executive officer of Swatch Group-owned movements company ETA, and Tissot CEO Sylvain Dolla in its executive group management board. In May, it saw the election to the board of directors of Marc Hayek, the CEO of Breguet and Blancpain who is regarded as a candidate to succeed Nick Hayek Jr. at the head of the group."

And, then I remembered that other watch brand - Baume & Mercier - owned by Richemont - that's right, with the "T" silent in French :) "Richemont" in French

Wikipedia tells us that in addition to Baume & Mercier, Richemont also owns: A. Lange & S?hne, Ala?a, AZ Factory, Buccellati, Cartier, Chloé, Delvaux, Dunhill, IWC Schaffhausen, Jaeger-LeCoultre, Montblanc, Mr Porter, Net-a-Porter, Panerai, Piaget, Peter Millar, Purdey, Roger Dubuis, Serapian, The Outnet, TimeVallée, Vacheron Constantin, Van Cleef & Arpels, Vhernier, Watchfinder & Co., and Yoox.

Richemont also trades on the Swiss Stock Exchange & its ticker symbol is CFR.

So, has Richemont been suffering similarly?

Not at all! Here's the 5-year chart for CFR:

Nicely up 145.60% over 5 years. And here's the comparison with the performance of MSCI-World:

Thus, Richemont SA has handsomely outperformed MSCI World over all the time periods above.

What's at play here?

'Cartier owner Richemont shines with better-than-expected sales as poor China demand offset by rest of the world' here written on January 16, 2025 tells us that while there is weakness in China, Richemont has benefitted from strength in other markets:

1. "Cartier owner Richemont reported record quarterly sales on Thursday, beating expectations as a slump in key market China was offset by robust demand in other regions.
2. "The luxury sector has been reeling from a crisis in the last few years as sales dropped sharply following the pandemic-era spending spree. Richemont was among the companies that were in a bind as shoppers bought fewer high-end items, particularly in its key Chinese market. While it might be a while before China recovers (if at all), luxury majors are now seeing the dynamics shift as growth is being driven less by one group of shoppers and more by a mix of markets, including Japan and the U.S. Richemont’s results will “add to the debate that the more premium luxury brands are likely to outperform, the luxury slowdown is more cyclical than structural (at least at the high end) and that there is enough growth in the rest of the world to offset China weakness,” Deutsche Bank analysts said in a note Thursday.
3. 'It seems that despite the challenging situation in China and in watches, Richemont has never been stronger,' said Jean-Philippe Bertschy, an analyst at investment firm Vontobel.

Clearly a Tale of Two Cities. So, what is Richemont doing right, which the Swatch Group is not?

Can all the difference be attributed to:

1. The Swatch Group's focus on maintaining employment and eschewing redundancies?
2. It's higher exposure to Greater China?, and
3. The greater role of the jewelry maisons in the case of Richemont? ["Of Richemont’s business segments, jewelry maisons, including Van Cleef & Arpels, contributed the most to growth. Watches, on the other hand, were trailing behind, contracting 8%." here]

or are there other factors at play here too which explain Richemont's far superior financial performance including its Return on Equity of 17.38% (compared to the Swatch Group's 4.45%)?

That'll need more in-depth analysis. Perhaps the subject of another article :)

P.S. Richemont's sales in the quarter ended December 31, 2024 were 10% more than in the previous quarter. Here's the Bloomberg video from January 16, 2025 discussing this, the geographic mix and the drag from China:

P.P.S. There is an article dated July 17, 2024 by Oliver R Muller titled "Reasons Behind the Swatch Group’s Profit Slump and How Things Could Improve" here which looks at the many reasons behind the Swatch Group's poor performance.