LONDON — There’s a new power couple on the luxury watch and jewelry scene, and it’s none other than Ralph Lauren and Johann Rupert.
On Monday, Polo Ralph Lauren and Compagnie Financière Richemont joined forces to create the Polo Ralph Lauren Watch and Jewellery Co. S.A.R.L., a 50-50 joint venture based in Switzerland. The new firm will design, create and distribute luxury watches and fine jewelry under the Polo and Ralph Lauren brands, with entry prices of $3,000 to $5,000 for watches.
“Since my days living in New York in the 1970s, I have admired Ralph Lauren and everything he stands for,” said Rupert in an interview with WWD. “He is a truly remarkable man. I admire his taste, style and incredible attention to detail, and I trust him totally.”
In Monday’s statement, Lauren said, “I believe strongly in this partnership. This business is an important part of our global luxury accessories strategy. I am confident that our unique design sensibility and luxury brand-building skills, combined with Richemont’s unique experience on a global basis, creates an opportune way for this partnership to succeed.”
The deal, which Polo executives said was two and a half years in the making, is a first for both companies: The high-end watch and jewelry market is uncharted territory for Polo, while Richemont, whose portfolio of brands includes Cartier, Van Cleef & Arpels and Dunhill, has never formed a joint venture with a designer brand. So far, Richemont’s strategy has been to own the companies in its portfolio outright.
Rupert said a joint venture, rather than a license or other partnership deal, was the only real option for him.
“I don’t have licenses. The question with licenses is always who is controlling the design and who has the final say. Now, when you see a watch with the Ralph Lauren name, you’ll know it’s the real thing, with Ralph Lauren’s attention to detail. He signs off on everything,” Rupert said.
The first products will launch at retail in fall 2008, with the watches making their debut in Geneva next spring. Both companies declined to give any sales projections for the new company, which will offer both men’s and women’s watch collections and high-end jewelry.
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As for the jewelry, Rupert said it was too early to go into detail. He said only that jewelry sales would likely be smaller in the beginning than watch sales. However, he said jewelry would grow faster. “Jewelry could grow dramatically and, generally as a sector, it is growing quicker than watches,” he said.
Richemont has a variety of lucrative watch brands in its portfolio, including Piaget, Baume & Mercier, IWC, Panerai and Jaeger-LeCoultre. In the 2005-06 fiscal year, sales in its specialist watch division rose 22 percent, with the highest rate of growth in the Americas.
However, the brand’s cash cow remains Cartier. In the 2005-06 fiscal year, Richemont’s sales were 4.31 billion euros, or $5.47 billion at current exchange. The jewelry division, which is dominated by Cartier, made up 52 percent of sales.
Although Rupert said he sees Ralph Lauren as a “respected, worldwide luxury name” and that the new watch and jewelry brand would be sold internationally, there is no doubt the U.S. is still a rich market to be mined. “Obviously, we’d like to expand this business in the U.S.,” Rupert said.
Analysts say the U.S. offers much potential for luxury accessories players. “We are convinced that the U.S. luxury market remains underdeveloped compared to Europe and moreover Japan,” said HSBC equities analyst Antoine Belge in a report Monday.
“Even though we do not consider Polo Ralph Lauren a luxury brand, its positioning is clearly high end and not fashion-oriented. We are also convinced that Richemont will develop a premium strategy for Polo RL,” he added.
The bank went on to say that, from a risk/reward basis, Richemont did well in pursuing a joint venture rather than a costly acquisition. It did add, however, that “50-50 [joint ventures] are not our preferred way of doing business in a luxury world where clashes of egos are common.”
But other analysts said the joint venture was a canny move on Richemont’s part.
“They’ve managed to add a big-name brand to their portfolio without having to pay any license fees or royalties — and they own 50 percent of the business,” said one London analyst, adding that Polo Ralph Lauren’s fashion profile would complement Richemont’s high-end, very classic brands.
But Rupert insisted that penny pinching did not come into the equation. “I don’t think we — or Ralph Lauren — have any problem investing our money, and no accountants or analysts were involved in making the decision to form a joint venture.”
Rupert stressed the new deal was not the first of many joint ventures and did not signal a change in strategy at Richemont.
“I would do more joint ventures if you could find me some more Ralph Laurens. But the reality is, there aren’t too many out there,” he said.
“And, at my age, if I’m going to form a joint venture, I am going to do it with someone I admire and whom I have fun with. It’s all very simple: It’s nice to have fun making money with someone you admire,” added the 56-year-old Rupert.
Rupert also admitted that he admired his new partner for another reason.
“As a ‘petrol head’ myself, I envy Ralph’s car collection. I will never be able to have that kind of collection. It is like mobile artwork,” he said.