LVMH luxury watches at Miami Watch Week

luxury giant LVMH is making an effort to gain share in the global luxury watch business, with a newly formed watch division and a range of new, higher-priced models.

Sales of luxury watches worldwide are estimated at about $30 billion this year, according to market research firm IMARC Group. They are expected to grow to more than $37 billion by 2032, as global wealth increases and Generation Z and millennials become more interested in high-end mechanical watches.

LVMH's jewelry and watches division posted sales of $11.8 billion in 2023, representing a 7% increase in organic growth. The luxury giant now has 10 watch brands, including TAG Heuer, Hublot and Zenith, along with fashion and jewelry brands such as Louis Vuitton, Bulgari and Dior, which also make watches.

Last month, the company named Frederic Arnault, the 29-year-old son of LVMH Chairman and CEO Bernard Arnault, CEO of LVMH Watches, which includes the TAG Heuer, Hublot and Zenith brands.

Analysts estimate sales of those three brands reached about $2 billion last year.

Frederic Arnault, who launched a series of highly popular new models at TAG Heuer, is expected to bring his focus on innovation, cutting-edge materials and creative designs to the broader group of brands. Analysts say LVMH could also continue to acquire attractive brands if they became available.

In interviews with CNBC during LVMH Watch Week in Miami, brand CEOs said 2024 is already shaping up to be stronger than 2023, when rising interest rates and recession fears tempered demand. Executives say they are especially encouraged by the resilience of the American luxury consumer.

“It's about cycles, and the beauty of the United States is that the cycles are very short,” said Benoit de Clerck, CEO of Zenith. “We went through ups and downs and all that, but I can assure you that today Zenith is definitely booming with good traction within the US markets.”

Watch sales are following a similar pattern to the broader luxury market, where the wealthiest consumers remain the strongest. Executives say the wealthy are less affected by rising rates and economic uncertainty, so more brands are catering to “super spenders” and VIP collectors who continue to spend on the highest quality and craftsmanship.

“High-end has really been one of the main drivers of our growth,” said Jean-Christophe Babin, CEO of Bulgari. “I think the wealthy are more eager than ever to invest in authentic, reputable and timeless brands.”

Babin said he is seeing growing strength in the high-end of all of Bulgari's businesses, which now include hotels, fashion and fragrances.

“We sold more high-end jewelry, more high-end watches, more high-end handbags,” Babin said, showing off one of Bulgari's coveted yellow gold Serpenti Secret watches that sell for $350,000.

LVMH is also targeting the fastest-growing luxury watch segment: women's watches. While women's watches account for only about a third of total sales, women's interest in luxury mechanical watches has skyrocketed thanks to increased exposure on social media and a growing number of models designed for women. The world's growing population of wealthy women (both self-made and inherited) is also driving sales growth.

“The trend is towards increasingly feminine and unisex watches,” said Babin. “Women have increasing power in terms of independence, autonomy and purchasing power. We believe that will continue.”

In the highly competitive world of luxury watches, brands have to constantly innovate with materials, complications and designs to gain share and keep collectors interested.

TAG Heuer, which has its roots in auto racing, found great success with its Carrera Plasma, using lab-grown diamonds. Their Carrera Plasma Diamant d'Avant-Garde Chronograph Tourbillon is priced at more than $500,000 and has a waiting list of more than two years.

TAG Heuer also introduced a teal Carrera Glassbox chronograph with a teal dial, referencing a shade of green used in auto racing in the 1920s and 1930s.

TAG Heuer CEO Julien Tornare said LVMH's advantage over other watch brands and groups is its relentless focus on reinvention and desirability.

“The Swiss watch industry has to some extent been quite conservative,” he said. “But at LVMH we feel pressure to try new things, to move forward. I think if we want to continue appealing to [a] new generation, it is very important to show that we will work for the future and not for the past.

Many of LVMH's brands are exploring their historical past in search of new designs and models.

Zenith launched its Chronomaster Triple Calendar, which features a triple calendar chronograph with moon phases, inspired by its rare El Primero prototype watch from 1970. The company also launched a new Chronomaster Sport in green, the most popular color for luxury watches. in recent years.

De Clerck said part of the Zenith's appeal to younger watch buyers and collectors is its price. While Zenith sells very complicated watches, it tries to offer value, such as the Triple Calendar that sells for about $14,000 but could probably be priced “thousands more” depending on the level of craftsmanship and complications required, he said.

“We have a very good proposal in terms of price compared to the competition,” he stated. “You have to watch the money a lot and we want to stay and maintain that spirit.”

At the same time, many LVMH brands are moving up the price ladder, with more expensive limited editions. Hublot, known for its big, bold watches, has just released a $250,000 limited edition watch, called the MP-10 Tourbillon Weight Energy System. Only 50 of these futuristic watches will be produced and they are expected to sell out quickly.

“We call it the art of fusion in watchmaking,” said Hublot CEO Ricardo Guadalupe. “We are connecting watchmaking tradition of more than 400 years with innovation. We do this through design, materials, new mechanics and new ways of making movements.”

— CNBC's Crystal Lau contributed to this report.