The luxury group Kering sells its watch division

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PARIS, Jan 24 (Reuters) – Kering (PRTP.PA) is shedding its watch division and plans to sell high-end brands Girard-Perregaux and Ulysse Nardin to current management, a move that will allow the French goods group to luxury to focus on activities in which he has scale.

The transaction is part of the company’s strategy to prioritize labels “with the potential to become significant assets within the group,” Kering said in a statement on Monday.

After being hit hard by the coronavirus pandemic, the high-end watch industry is showing signs of improvement, helping to fuel a 32% rise in sales at luxury group Richemont in the third quarter ending in December.

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“Kering is likely making the most of a recovering watch market to exit a category where it was suffering, given its smaller relative position against larger competitors in this space,” said analyst Luca Solca. at Bernstein, who called the move “positive.”

Gucci owner Kering has worked to strengthen the watch business, streamline distribution channels and revamp product lines. It cut about a quarter of the division’s staff in September 2020 as the pandemic caused store closures and halted travel.

Despite the legitimacy of Kering’s watch brands in the high-end market, competition has intensified among the major players, with the most successful brands becoming stronger and stronger, noted Vontobel analyst Jean-Philippe Bertschy.

The move should highlight Kering’s potential for new M&A activity.

Rumors of a possible merger between Richemont and Kering have been circulating for years, further fueled by LVMH’s takeover of American jeweler Tiffany, which has increased pressure on its rivals to expand.

“Kering definitely has the ambition to grow, both organically and through acquisitions,” Solca said. “Not in watches, though.”

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Reporting by Sudip Kar-Gupta, Mimosa Spencer and Silke Koltrowitz Editing by Peter Graff, Kirsten Donovan

Our standards: The Thomson Reuters Trust Principles.

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