Rolex CEO Warns Against Viewing Luxury Watches as Investments

Welcome to the 32nd edition of the Maximalist! Dive into the ultimate guide, filled with insider insights into the world of fashion, art, real estate, travel, jewelry, and horology.

The world of luxury is never boring, and this week is no exception. Let’s dive in!

Markets

On this week’s agenda:

1. Rolex CEO Warns Against Viewing Luxury Watches as Investments

2. The Well: Expanding the Frontiers of Wellness to Geneva

3. Puig's Strategic Leap: A €2.5 Billion IPO Journey

4. Zegna Group’s 19.3% Growth from Organic Sales

5. Porsche partners with Applied Intuition

6. Sotheby’s to Set $30M Record for Lucio Fontana’s 1964 Artwork “Concetto spaziale, La fine di Dio”

7. Christian Louboutin Joins the Billionaire's Club

   
   

Rolex CEO Warns Against Viewing Luxury Watches as Investments

Jean-Frédéric Dufour, the CEO of Rolex SA, has voiced concerns over the trend of treating luxury watches as financial investments, a stance that comes in light of the speculative surge experienced during the pandemic. In a rare dialogue with the Swiss newspaper NZZ, Dufour emphasized the risks associated with equating watches with stocks, particularly as this perspective distorts the true value and essence of luxury timepieces.

The pandemic era saw an unprecedented boom in the pre-owned luxury watch market, with brands like Rolex, Patek Philippe, and Audemars Piguet witnessing soaring prices due to low interest rates and the cryptocurrency boom. However, this bubble has seen a significant downturn, with the Bloomberg Subdial Watch Index indicating a 40% drop in prices for the most traded models over the last two years.

Despite Rolex's dominant position in the Swiss watch market, achieving over 10 billion Swiss francs in sales in 2023, Dufour anticipates 2024 to be a challenging year for the industry. He predicts that the slowdown will particularly affect smaller watch brands, which may not withstand the sales fluctuations as robustly as established names like Rolex.

Dufour points to several factors contributing to the industry's pressures, including the strong Swiss franc, rising costs of materials like gold, increased interest rates, and a tense geopolitical climate, all of which dampen consumer spending enthusiasm. He also highlights the detrimental effect of discounting on luxury brands, noting that it undermines the emotional value attached to such high-end products.

This cautionary stance from Rolex's CEO underlines the complexities of the luxury watch market, emphasizing the importance of appreciating these timepieces for their craftsmanship and heritage, rather than their potential for financial gain.

The Well: Expanding the Frontiers of Wellness to Geneva

The Well, a health-focused members club based in New York, is gearing up for its European debut with a new location set to open in Geneva in 2026. This move is part of an ambitious expansion strategy in a sector that has seen rapid growth, with the wellness industry valued at $5.6 trillion in 2022. The Geneva facility, housed in a renovated hotel, will offer memberships to local residents and workers, featuring amenities such as indoor and outdoor swimming pools, a terrace, and expansive wellness services covering 20,000 square feet with views of Lake Geneva.

Since its inception in 2019, The Well has been at the forefront of blending social interaction with wellness, offering a range of services from vitamin drips to lifting facials and health coaching, integrating both Western and Eastern medical practices. The pandemic has only fueled the demand for such wellness-centric communities, leading to The Well's expansion into real estate and hospitality partnerships.

Geneva, known for its international business community and concentration of wealth, presents an ideal setting for The Well's first European outpost. The location will cater specifically to physical therapy needs, acknowledging the local skiing culture and the injuries it often entails. This approach signifies a tailored strategy to meet the unique wellness concerns of each community it serves.

Competition in the wellness sector is increasing, with numerous high-end clubs emerging, particularly in New York. Yet, The Well distinguishes itself as a wellness social club, addressing not just physical health but also the social and mental well-being of its members, especially relevant in today's landscape of remote work and social isolation.

With plans for further expansion in the US and Europe, including wellness clubs with branded residences in Miami and partnerships with luxury hotels, The Well is poised to capitalize on the growing prioritization of health and wellness among affluent consumers. This expansion reflects a broader trend towards integrating wellness into everyday living spaces, catering to a demographic that is increasingly recognizing health as their most valuable asset.

Puig's Strategic Leap: A €2.5 Billion IPO Journey

Puig, the prestigious Spanish beauty conglomerate known for owning brands like Charlotte Tilbury and Byredo, is set to embark on a significant financial venture by going public. The family-led company announced its intention to list shares on several Spanish stock exchanges, including those in Barcelona, Madrid, Bilbao, and Valencia. This move aims to secure over €2.5 billion through an initial public offering (IPO) and subsequent secondary sales, while the Puig family maintains the majority stake and control.

With a history spanning 110 years, Puig has shown remarkable growth, reporting a 19% increase in net revenues to €4.3 billion in 2023, and a 16% rise in net profits to €465 million. This IPO represents a critical step in the company's legacy, especially amidst a period of generational transition within the Puig family.

Chairman Marc Puig highlighted the strategic nature of this decision, emphasizing the blend of family ownership with market accountability. He believes this approach will bolster Puig's competitiveness in the global premium beauty market. The move follows in the footsteps of other industry giants like L’Oréal and Estée Lauder, which balance public trading with founding family involvement.

Puig's strategy includes a stronger focus on skincare and makeup, favoring fully-owned or majority-owned brands over licensed ones to avoid the high costs and disruptions of license renewals. Dating back to 2020, their recent acquisitions include luxury skincare brand Dr. Barbara Sturm as well as Byredo and Charlotte Tilbury.

The IPO is part of Puig's broader ambition to nurture premium brands with a long-term perspective, maintaining its "unique and creative DNA" as a cornerstone. Despite fragrance being its primary revenue source, skincare showed the most growth in 2023, underscoring the company's profitable and diversified business model. This strategic public listing marks a new chapter in Puig's storied existence, aiming to strengthen its position in the ever-evolving beauty industry landscape.

Zegna Group’s 19.3% Growth from Organic Sales

The Ermenegildo Zegna Group, a prestigious Italian luxury fashion conglomerate, has reported a significant 19.3% rise in its full-year organic sales, alongside a proposed 20% increase in its annual dividend. This growth is attributed to the strong demand for the group's luxury offerings, including its flagship menswear brand Zegna and the U.S. labels Thom Browne and Tom Ford Fashion.

The group's performance was particularly strong in Greater China, where revenue surged by 24%. This regional success underscores Zegna's robust positioning in key luxury markets. Ermenegildo Zegna, the Chairman and CEO, expressed satisfaction with the company's progress, particularly highlighting the integration of the Tom Ford Fashion business as a strategic enhancement of Zegna's luxury and glamour offerings.

For 2023, Zegna's revenue climbed to 1.9 billion euros ($2.06 billion), with the company proposing a dividend of 0.12 euros per share, reflecting its financial health and confidence in future growth. The group, which made its Wall Street debut in late 2021, also saw its EBIT rise to 220 million euros in 2023, marking a substantial increase from 157.7 million euros in the previous year. This financial achievement demonstrates Zegna's successful strategy and its ability to thrive in the competitive luxury market.

Porsche partners with Applied Intuition

Porsche, the renowned German automobile manufacturer, has announced a strategic partnership with software supplier Applied Intuition. This collaboration aims to co-develop cutting-edge automotive software while ensuring ownership of the software developed and reducing reliance on opaque third-party suppliers. The initiative is set to simplify the software integration process, enhance the speed of implementation, and create unique user experiences through the development, deployment, and continuous updating of vehicle software.

Qasar Younis, co-founder and CEO of Applied Intuition, highlighted the distinct challenges of software and AI development in the automotive industry, emphasizing the company's role in facilitating the integration and updating of diverse software and AI components. This partnership is particularly timely as the need for frequent updates of software components from various vendors becomes increasingly critical in new vehicle models.

Porsche plans to employ software best practices and continuous integration/deployment (CI/CD) processes to efficiently manage software in its future vehicles. This will be supported through an off-board platform and various tools for end-to-end software validation, including software-in-the-loop (SIL), hardware-in-the-loop (HIL), and vehicle testing.

Michael Steiner, a member of Porsche's executive board for research and development, expressed that this partnership with Applied Intuition will enhance Porsche’s understanding of software across all vehicle components, allowing for software-based testing early in the development process. This collaboration is not only expected to accelerate the iteration process but also to focus on delivering superior consumer experiences. Additionally, it will bolster Porsche's software capabilities, complementing the Volkswagen Group's ongoing activities in this domain.

Sotheby’s to Set $30M Record for Lucio Fontana’s 1964 Artwork “Concetto spaziale, La fine di Dio”

Lucio Fontana's iconic Concetto spaziale, La fine di Dio (1964), a treasured piece from the Cindy and Howard Rachofsky collection, is poised to create a sensation at Sotheby's auction in May. This remarkable cadmium yellow canvas, part of Fontana's acclaimed series, carries an estimate of $20 million to $30 million. Such a valuation not only positions this artwork as the most expensive Fontana piece to ever hit the auction block but also tees it up for a potential new auction record. This particular work is one of the mere four cadmium yellow pieces in the La fine di Dio series, one of which previously established Fontana’s auction record at $29.1 million in 2015.

The Rachofsky's Concetto spaziale, La fine di Dio is distinguished by its vibrant color and intense composition, featuring densely packed punctures surrounded by thick impasto, which was notably showcased at the Met’s Fontana retrospective in 2019. Acquired by the Rachofskys in 2003 for $2.3 million from Sotheby’s London, it set a record for the highest auction price for a Fontana work at the time. This acquisition marked a pivotal moment for the Rachofskys’ ambitious goal of cultivating an internationally recognized collection, with an eye towards underappreciated movements.

The upcoming sale at Sotheby’s Contemporary Evening Auction on May 15, however, raises eyebrows concerning its impact on the Dallas Museum of Art. In 2005, the Rachofskys, along with other notable Dallas collectors, pledged their entire collection to the museum, a commitment described as an "irrevocable gift." Despite this, the sale aligns with the collectors' prerogative to adjust their collection to fit their evolving vision, a flexibility that has seen them contribute over $50 million in art to the museum. Proceeds from this auction are intended to fund further acquisitions, continuing to enrich the museum's collection and, by extension, its audience.

Christian Louboutin Joins the Billionaire's Club

Christian Louboutin, the illustrious French designer known for his signature red-soled shoes, has ascended to billionaire status. With his fashion brand valued at a staggering $3.2 billion by the investment firm Exor, Louboutin's 35% stake has catapulted his net worth to approximately $1.2 billion.

The journey to this monumental achievement began in 1992, when Louboutin opened his first boutique in Paris. The birth of the iconic red sole was as serendipitous as it was innovative—originating from Louboutin applying his assistant's nail polish to a pair of heels. This distinctive trademark has since garnered global acclaim, making Louboutin's designs a staple among celebrities like Angelina Jolie and Sarah Jessica Parker.

Louboutin's belief in the empowering nature of high-heeled shoes has been a driving force behind his brand. In 1991, he launched the company alongside business partners Herni Seydoux and Bruno Chambelland. The brand's journey took a significant turn in 2021 when it sold a 24% stake to Exor, the investment vehicle of the billionaire Agnelli family, for an estimated $650 million. This deal not only made Exor the largest stakeholder but also marked a strategic expansion, particularly into the Chinese market, leading to a 30% increase in the brand's value.

Recent collaborations have further embedded Louboutin in popular culture. In 2023, he designed custom footwear for Taylor Swift's Era Tour and Beyoncé's Renaissance Tour, showcasing the brand's versatility and appeal across different entertainment spheres.

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