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Citizen considers luxury acquisitions to attract high net worth customers

by Corinne Gretler and Lisa Du

Bloomberg

Citizen Watch Co., the country’s largest watchmaker, is eyeing acquisitions that could add premium timepieces to its offerings, as the company looks to gain more high net-worth customers.

The company will consider targets in the luxury segment with brands that sell watches worth about ¥2 million ($18,300) or more, Chief Executive Officer Toshio Tokura said in an interview at Citizen’s headquarters in Tokyo. It will also look at labels in other price ranges, he said, specifying that Citizen doesn’t have a time frame to make any purchases. Tokura said Citizen will keep an eye on developments in the smartwatch segment.

Now that Apple Inc. has dethroned Rolex SA as the world’s biggest watch brand, Citizen is considering raising its credentials as the lower-end segment wilts in the face of competition from fitness brands and smartwatches. A luxury acquisition would strengthen the portfolio of Citizen, which two years back bought Frederique Constant SA and gained control of Swiss brands that have entry prices from about $1,000 to more than $10,000. Such a move would also help it compete with Richemont-owned Vacheron Constantin SA and Swatch Group AG’s Blancpain SA.

“We have to look at the total picture and see what makes sense for us,” Tokura said Thursday. “It could be high-end, it could be another range.”

Citizen’s plan to build on its multibrand strategy comes as demand for watches recovers.

Swiss watch exports rose 2.8 percent in the January-to-November period, following two years of declines amid a crackdown on gifting in China and terrorist attacks in Europe. The recovery has been boosted by demand for higher-end mechanical timepieces, while cheaper quartz models have struggled.

By contrast, domestic watch shipments are estimated to have slipped 1 percent in 2017. Citizen’s core business is focused on mid-range timepieces that are predominantly quartz. The company’s namesake Citizen label is still the most important, generating some 70 percent of total sales, Rene Weber, an analyst at Bank Vontobel AG, wrote in a report.

While Citizen will continue to focus on growing sales in the U.S., Japan and China — its three top markets by revenue — the company is also eyeing growth in Southeast Asian countries like Malaysia, Thailand and Vietnam, Tokura said. The company has forecast revenue will rise to ¥320 billion in the year through March, after earlier declines.

“In 2018, we’re looking to keep up with the industry recovery seen in the second half of 2017,” Tokura said. “The high-end, affluent segment saw strong demand in Swiss watches, and that should trickle down to mid-range products this year.”