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Citizen Mulls Deals To Add $18,000 Watches To Broaden Appeal

Citizen Watch Co. is open to acquisitions that could add $18,000-and-up timepieces to its offerings as Japan’s largest watchmaker looks to gain more high net-worth customers.

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

After Apple Inc. dethroned Rolex 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 beef up the portfolio of Citizen, which two years back bought Frederique Constant and gained control of Swiss brands that have entry prices from about $1,000 to more than $10,000, and help it compete with Richemont-owned Vacheron Constantin and Swatch Group AG’s Blancpain.

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

Citizen shares have surged about 23 percent in the past year, in line with the increase of the benchmark Topix index in the period. The stock gained as much as 1.4 percent Friday in Tokyo.

Multibrand Strategy
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, Japanese 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 yen in the year through March, after declining in the year-earlier period.

“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.”

This article was provided by Bloomberg News.

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