You May Soon See LVMH Watches Fitted With Zenith Watch Movements

LVMH plans to ramp up manufacturing at its Zenith brand to supply movements for timepieces across the luxury group’s watch division. “We think we can go beyond the brand to develop them as a movement manufacturer for the group,” Frederic Arnault, who heads LVMH’s watch unit, said. 

The strategy to boost Zenith’s production of movements — the mechanical heart of a watch — suggests LVMH Moët Hennessy Louis Vuitton SE wants to expand its Swiss watchmaking capabilities internally rather than by acquiring component makers. Known for its El Primero chronograph, Zenith already makes some movements for LVMH’s Hublot brand and has provided them to Tag Heuer in the past.

The manufacturing of mechanical movements is a critical and costly component of modern industrial watchmaking, and Zenith has a long history of producing high-end movements. Ramping up production could provide cost synergies for LVMH and give Zenith a path to growth at a time of cooling demand for luxury watches. “We have the purpose of becoming an industrial actor for the industry for our brands,” said Arnault. 

Frederic, who took on a newly created role running the watch division in January, said the group didn’t bid on any watchmaking operations put up for sale by the Swiss Sandoz Family Foundation. Those assets included movement maker Vaucher Manufacturer Fleurier and the Parmigiani Fleurier brand. “We’re not interested and we didn’t make an offer,” said the 30-year-old Arnault.

Vaucher supplies major Swiss brands including Audemars Piguet and premium models of LVMH marques such as Tag Heuer. LVMH rival Hermes International SCA owns a 25% equity stake in Vaucher and has a right of first refusal for any offers to buy it. LVMH’s lack of interest could put Hermes in pole position to acquire Vaucher and any other watch assets offered by the Sandoz Family Foundation in the sale, which is being run by Deloitte. 

A Hermes representative declined to comment on the Sandoz assets. Last month, Chief Financial Officer Eric du Halgouet told reporters that the Birkin bag maker was continuing to monitor Vaucher. LVMH’s jewelry brands Bulgari and Tiffany also produce watches, as does the Louis Vuitton brand under the leadership of Frederic Arnault’s younger brother Jean, who recently revived the Daniel Roth and Gerald Genta marques. 

LVMH trails rivals Richemont and Swatch Group AG in watch manufacturing and sales, according to analyst estimates. Rolex is the largest Swiss watchmaker, producing more than a million timepieces a year with sales of more than 10 billion francs ($11.3 billion), according to Morgan Stanley and LuxeConsult. “It is interesting to see that, despite having a small presence in Swiss made watches, LVMH is investing in movements,” said Bernstein analyst Luca Solca. “It seems a sign that they mean business,” and could step up the watch business at Tiffany, “which is negligible today,” he said.

Image & text credit: Bloomberg