After 9 years of unprecedented growth at Cartier with Cyrille Vigneron as its CEO, Richemont has decided that it now time for a change, announcing the appointment of Louis Ferla as the new CEO of Cartier. Throughout his tenure, Vigneron has applied a very clear strategy of fostering iconic products, of which the brand holds some of the most and the longest in the watch and jewelry industry (see the chart below on top iconic watches in the luxury industry, compiled for Morgan Stanley by Luxe Consult.) Indeed, Cartier has been a structural outperformer on both product categories for years, because Cartier is a very unique luxury brand not comparable with any other for many reasons.

Cartier is a unique luxury maison

Across both divisions, Cartier provides this very unique combination of prestige at accessible price points. Or put in another way, the brand’s perceived value is a lot higher than its actual price positioning. The Parisian luxury maison still offers an access to its temple at very reasonable price points, with such watches as the Ronde Must de Cartier, priced at CHF 2,920. Sure it’s a quartz watch, but apart from that it ticks all the boxes for an aspirational customer of the brand. And that’s one of the key points that Mr. Vigneron’s brand strategy addressed: Connecting with Gen-Z.

Selling tourbillons and minute repeaters when you are perceived as a jeweler is quite a challenge, even though Cartier continues to sell such pieces today, for instance a minute repeater with a double tourbillon mystérieux priced at CHF 530.000. But this remains a niche business, allowing the brand to keep its watchmaking legitimacy while still making its “bread and butter” business with Tank, Pasha and Santos watches.

When Cartier started its epic journey to become that iconic luxury brand, Alain-Dominique Perrin, then-CEO of the brand, launched “Les Must de Cartier” concept. After that, Cartier became probably one of the first, if not the first luxury brand, understanding that you need to offer an entry point for any product category both for soft and hard luxury.

First offering luxury lighters, followed by perfumes, sunglasses, writing instruments and leather goods, the maison successfully devised an extraordinary way of creating traffic to its boutiques and increasing brand awareness.

Which brings us to the challenge that the incumbent CEO will have to address: Reviving Cartier’s accessories that gave the brand its “lettres de noblesse” in the 1980-1990’s.

Beyond question, Cartier is the brand that allows Richemont to thrive and also to finance its less successful ventures, such as the recent Yoox-Net à Porter investment which cost the group a few billion in write-offs. It is fair to say that Cartier and Van Cleef & Arpels are the two brands allowing the group to be as successful as it is — and creating envies amongst its competitors such as the LVMH group (see this article on Bernard Arnault’s personal stake in Richemont.)

Cartier generates approximately CHF 10B in sales, which is roughly half of the group’s total sales, of which watches contribute to a little bit less than one third, at CHF 3.1B (Morgan Stanley estimates). Even though the watch business unit does not produce the same results as the jewelry unit, neither in terms of growth nor in terms of profitability, Cartier generates overall the cash flows needed. Both in terms of acquisitions and for supporting some sister brands which are not enjoying the same success.

Van Cleef & Arpels has had a faster growing pace in the last few years than Cartier. But the nominal size of sales is only one-third and personally I believe a lot more in the long-term growth potential of Cartier.

Together, Cartier and Van Cleef & Arpels generate 68% of the group’s total sales and most of the EBIT margin, which makes them the anchors of Richemont. The two brands also generate an operating profit which is more than twice that of the specialty watchmakers. These comprise eight brands, most of which generate unsatisfactory margins or even worse, lose money. Vacheron Constantin is the one exception generating an estimated 28% EBITDA which is considered a good result for a watch brand.

A new CEO is not meant to change the brand’s DNA. But he or she can help to foster the strong points. I’m a huge fan of Mr. Vigneron as a visionary brand builder. That said, I do think Mr. Ferla is a better operational manager and he has showed that while working at Vacheron Constantin which he had brought into the billionaires’ club of Swiss watchmaking with CHF 1.097B sales in 2023 (Morgan Stanley x LuxeConsult estimate).

Louis Ferla is less a man of branding theories and more of a field manager with a good understanding of team management. Will he succeed to further increase Cartier’s results? Yes, because there is still some room to increase the margins – which is by the way not the group’s anchor shareholder’s main expectation – and further increase the brand’s overall efficiency.

Additionally, I expect that Mr. Nicolas Bos, the newly appointed group CEO and former Van Cleef & Arpels CEO, to interact very well with Mr. Ferla because both gentlemen are high complementary. Mr. Bos has a profile that’s quite comparable with that of Mr. Vigneron, they are both visionary brand builders, and yet he’s also very good at managing people. Meanwhile Mr. Ferla is the guy who will deliver the job efficiently and discreetly.

Well, if I were to guess I would say that the current Chief Marketing Officer of the brand, Laurent Perves, would tick most of the boxes. He has done a very good job on the sales side and brings also the branding knowledge gained at Procter & Gamble (Yes that same marketing school that Mr. Babin of Bulgari and Mrs. Resta at Audemars Piguet have attended!) This was before he joined Audemars Piguet for a two-year stint, and thereafter joining Vacheron Constantin in 2016.

Even though Mr. Johann Rupert publicly and more than once expressed his aversion of the “French boys” it does seem that he is still prepared to have them among the group’s most important managing positions.

The next move would be to appoint a new CEO at Jaeger-LeCoultre in order to replace Mrs. Catherine Rénier who is officially replacing Mr. Bos at the helm of Van Cleef & Arpels. And for the time being, Jaeger-LeCoultre’s Chief Financial Officer Philippe Hermann has been appointed CEO ad interim.