Cartier understands its real customer draw is passion, not just the iconic watches and jewellery and other luxury goods it produces. CEO Bernard Fornas discusses volatility, tradition and the holidays.
For Bernard Fornas, President and CEO of Cartier International, business has never been so good. As Cartier prepares for the Christmas season, it is one of the rare retailers that may not have enough stock to satisfy clients. An enviable position to be in.
Fornas is bullish about the coming season. Strong demand in the Asia-Pacific region has helped protect the luxury goods industry, where Cartier’s ‘Maison Mere’, Richemont’s sales, rose 60 percent in the first half compared to 35 percent in the Americas and 22 percent in Europe.
Even so, growth rates are starting to ease from strong first-half performance. October sales at Richemont rose 26 percent at constant exchange rates, down from 36 percent between April and September, a direct consequence of the European slowdown.
But things could be worse for the Swiss group. Although Richemont shares have fallen about 13 percent so far this year, on the 11th of November, 10:52 GMT, they were trading at 14.1 times estimated March 2013 earnings, at a premium to Swatch Group at 13.5 times estimated 2012 earnings, but at a discount to LVMH at 16.5 times.
Explaining this relatively good performance against the industry backdrop, Fornas puts his company’s success down to planning for the worst. “Today we cannot control the volatility, we cannot control the economy, we cannot control the debts [… ] I have to manage as I can – so the only thing I know is that I don’t know,” Fornas told INSEAD Knowledge at the Women’s Conference in Deauville in October. “In this picture, what we have tried to do is to organise Cartier as a flexible, a very reactive and a very quick company in all the decisions. Which means that in front of this volatility, I’m supposed to be the quickest, the most flexible and the most reactive - what else can you do?”
“The only thing I can say is that I have prepared Cartier for the worst when everything was going well, and this is why I think today we are doing so well, because we were prepared for all that.”
Legacies and opportunities
And the ‘Maison Cartier’ has a long history of being reactive and seizing opportunity. Established by Louis-Francois Cartier in 1847 when he took over his master’s workshop, it was the creator of the first men’s wristwatch in 1904. Born from the complaint of Brazilian pioneer aviator Albert Santos-Dumont to his friend Louis Cartier about the unreliability and impractical nature of pocket watches when flying, the "Santos" creation quickly took on with their other clients.
But Cartier’s current strength is built on more than just planning for an economic doomsday scenario. Fornas claims it was also the foresight of spreading risk over several geographic regions that has meant Cartier’s results are not as deeply affected by the troubles in its European home market.
“[Cartier is] a plane with 5 engines, which means that we are equally good in Europe, in Japan, in the Americas, in the Middle East and in the Far East. If you have one engine, like the European engine, with a reduced speed, then other regions will compensate for the loss or the reduction of speed in that or this region.”
And even with Europe’s reduced speed, says Fornas, “Asia is doing tremendously well, especially driven by China, and not only because of what we sell in mainland China, but what we sell to the Chinese travelling around the world, like in France. When I tell you that France is not doing so well, thanks to the Chinese, we (Cartier) are doing well – it’s compensation from the Chinese coming to France and the same for Spain or Italy.”
Planning for the worst, coupled with good geographical risk mitigation, has certainly helped Fornas weather the economic storm and come out ahead – but when asked where he sees Cartier in the next three to five years, Fornas admits that his company has one thing that many others do not: “Cartier will be still the most beautiful brand in the world by far, because you need to continue to create desirability. We are managers of desire, that is what we are. The day you lose desirability, you are dead. And the day your brand loses desirability, you are dead. So I want to continue to maintain Cartier at the highest level of image and desirability.”
INSEAD Knowledge interviewed Cartier International CEO Bernard Fornas at the occasion of the Fifth Edition of The Cartier Women’s Initiative Awards, a joint partnership project initiated by Cartier, the Women’s Forum, McKinsey and INSEAD.