Stock market points versus confidence pointsce points

August 2003

A few of the newspaper clippings that landed on my desk… “Hong Kong watchmakers refuse to exhibit at Zurich”(1); Watch industry in distress: 26 jobs lost at Le Locle“(2);”At PPR, luxury turns out to be expensive“(3);”Luxury: not Cartier!“(4);”Richemont lays off 80 people in Geneva"(5)…

Deciding to get away from the pile of 'bad news', we decide to head into the watch country to see what is happening. By train, we cross through the watchmaking techno-park, a 350-kilometer arc stretching from Geneva to Basel, where the essential worldwide watchmaking savoir-faire is concentrated.

Here, apparently prosperous heads of enterprises – independents, watchmaker-owners, representatives from the world of luxury, marketing spec-ialists, entrepreneurs, kings, artists – declare unanimously, “While things may certainly be difficult for so-and-so, I am doing quite well!” If we try to quantify the situation, the general response is “Same as last year, which was good.”

Yes, well, what should we believe?

No one resorts to laying off people with a happy heart. Not because of some social conscience – let's not be naïve, especially in these hurried times of neo-liberalism – but in terms of 'image deficit'.

That Cartier has to 'slim down' might bring joy to the stock market (in the days following the announcement of 200 layoffs, Richemont's stock rose nearly 18% to finally stabilize up 10% at the end of June 2003). But what about the 'image deficit' which is measured in confidence points by the consumers? And today, isn't a confident point worth more than a volatile stock market point? Isn't it wiser to bet on the long term (confidence is built brick by brick) rather than on effervescence (champagne bubbles don't last very long). After all, even if the diamond is the cousin of oil, luxury watchmaking is not a strategic or essential raw material.

As we look around, and think about it, what is the conclusion?

There is another clipping on my desk. This time, it is 'good news'. “Swatch Group announces greater market share in all segments”(6). During the first quarter of 2003, the Group's watch sales increased 6% to 7%, with the haut de gamme brands leading the way. So, I ask myself a question, the same one: are the reasons for this 'relative' good health due to the industrial nature of the Group? The industrial operation forces management to keep both feet on the ground. When there are ateliers and equipment to keep working, one is instinctively wary of strategies that are not connected to concrete reality. Obliged to produce, one makes only what one can sell. In the world of engineers, the bubbles don't last a long time. Could this be one of the 'secrets' that explains the good health of the emblematic group dominating Swiss watchmaking?

Sitting on 4 billion Swiss francs in turnover, the patriarch Hayek has, however, “the blues”(7). Officially he has passed the torch to his son Nick Jr, but he has not yet been able to leave the spotlight. On the contrary, he rants and raves at the world of finance: “We know how to avoid the catch phrases of finance and the stock market that often lead one to commit excesses… If I had the cash to repurchase my shares, I would do it tomorrow. But I would need 5 billion francs. The banks are ready to lend it to me. But me, I was badly brought up. I don't like to be in debt!” A warning to amateurs and those who like the vertiginous heights of the stock market as they continue their way on the edge of the precipice.