What Happened To Montblanc?

[fountainpende]

Dear all,

 

today, I was browsing through the Richemont's annual report ... and I was SHOCKED

 

Montblanc's operating profit is down 64% compared to last year's profits (from 120m € to 43 m €)!! Margin is down from 15% to 5% ...

 

See:

http://www.richemont.com/images/investor_relations/reports/annual_report/2014/ar_fy2014_s92mf72js8.pdf

 

Does anyone know what happened there?

 

Best regards

Michael

Edited June 3, 2014 by fountainpende

[Zenistar]

Profits have been down for a while, but the only thing i can find specifically is that recent profits are being hit by them provisioning for Montblanc to move into the women's jewellery market.

[The Blue Knight]

What goes up must come down look at Nokia for instance.

[erpe]

it's current marketing policy is based entirely on its self-perceived importance and when the tide turns, as it inevitably will, its fall from grace could be quite dramatic.

- Peter Twydle - (about Mont Banc)

 

It seems we are seeing that day

[The Blue Knight]

I wonder what may happen in the long term if this trend continues? Will they start scaling back production of the high priced limited editions or start branching off into sub £200 and sub £300 pens.

[Bananabender]

"Unfavourable currency effects and soft sales across product categories and geographies, particularly in mainland China, led to a 5 % sales decrease.

Compared with other Group businesses, Montblanc relies more on local customers in both established and new markets and enjoys fewer sales from tourism. Down to 6 % of sales, the lower operating contribution also reflected restructuring provisions amounting to € 25 million and the closure of numerous points of sale.

With effect from 1 April 2014, Montblanc Maison will be reported within the ‘Other’ segment."

[Algester]

because every rich guy has already brought their... uhh... confidence piece and that MB is not getting any money from second hand sales? like most of us does? wait... I Don't own any MBs nor could I afford it second hand, NOS, or first hand

[Guernseytim]

Their leather products are also seriously overpriced. I suspect they're good quality but they more than double the price of things by sticking the MB branding on things.

 

I'm pretty sure people are very aware of that and buying high quality items from other brands for less.

[dneal]

Their income is off only slightly. Their expenses are up dramatically. They cite the closure of numerous points of sale, but I have to wonder about the boutiques they've opened. I haven't studied the timeline of store openings, but I never could see that being a good idea. I would be surprised to discover if any significant number of them were even profitable (and based on the numbers, one could speculate that they're not). Perhaps they're trying Apple's strategy of just funding places for customers to try their products (and everybody seems to be trying it to some extent). Apple does make significant sales at their stores, but can afford to keep them open even if they weren't profitable (because they still generate out of store sales). Montblanc should have left that to the dealers.

 

When's the last time you saw a line outside a MB boutique for the new release? As an aside, the same applies to Samsung, Microsoft, and other "brand" stores trying to mimic part of Apple's business model.

[Joane]

I agree they should have kept the experienced pen dealers outside the boutiques. Closing down points of sale and spending money building new boutiques had to take its toll. Those dealers at least gave them some steady clientele for their writing-related products whereas the boutiques may be more prey to the vicissitudes of the luxury market and economic ups and downs.

[BrandonA]

Can't quite get the comparison with Apple/Samsung/Microsoft. Their business models is about turning out millions of units. MB is more exclusive so you'd expect to see lower volume but more profit per volume. I'd suggest someone like Parker would be more similar to the named electronics companies because they sell to a wider audience with a more affordable product.

 

I think the excessive above inflation price increases might start to be taking a hit. This years WE pen is going to cost £740. This is far more than last years Balzac and even more than the Collodi (Collodi was more expensive than the Balzac).

 

Having spoken to staff at the 2014 launch party last week a number of them said that the new leather range and some of the jewelry is aimed at a younger audience. The average age of of guests at the party though was older. Traditionally the older you are the more disposable money you have. Is it therefore wise to design new products to a group that can't afford them. I nearly choked on my canape when the lady stated that £800 for a bag was good value.

 

I'd love to buy more leather goods (ipad case; new wallet; key ring; passport holder) but the prices are huge.

[dneal]

The comparison is with Apple's retail store model, not Apple. Brands (of all kinds of products, but particularly tech) have been trying to open their versions of "Apple Stores". Samsung and Microsoft are two notable and prominent examples.

 

So now we see "Montblanc Boutiques". I wonder where they got that idea? We (according to the report) see sales down by only 5% but expenses up by 64%. I don't think that's because the price of "precious resin" increased. What is different?

Edited June 3, 2014 by dneal

[BrandonA]

Montblanc have had stores for a lot longer than Apple - Birmingham in the UK (2nd city) got their MB boutique in 2003-4 (I bought my Verne from them pretty soon after they opened), the Apple store has only been there a couple of years. Apple products are also freely available from many other places both online or in the High Street. I also think the poor level of service you get in an Apple store but their ironically named geniuses is far from the experience you get from a high end boutique such as MB.

 

I'm not an accountant but companies often state reasons for lower profit due to one off costs which often include expansions. Is this mentioned in MB's accounts or is it merely that sales are down?

[torstar]

great pen company, hope they start focusing on pens as a priority again

[littlepen]

I wonder how this compares to other writing instrument brands ? Re cheaper pens wasn't there talk of a cheaper line just ball / rollerball.

[GTOZack]

if they need another store opened id be glad to run that bontique in NY

[dneal]

Montblanc have had stores for a lot longer than Apple - Birmingham in the UK (2nd city) got their MB boutique in 2003-4 (I bought my Verne from them pretty soon after they opened), the Apple store has only been there a couple of years. Apple products are also freely available from many other places both online or in the High Street. I also think the poor level of service you get in an Apple store but their ironically named geniuses is far from the experience you get from a high end boutique such as MB.

 

I'm not an accountant but companies often state reasons for lower profit due to one off costs which often include expansions. Is this mentioned in MB's accounts or is it merely that sales are down?

 

I'm looking at this dispassionately, but you don't seem to be. I'm beginning to assume you're a MB fanboy. That's ok, but if that's the foundation your discussion will be built off of then there's no point to me bothering with it.

 

When Apple opened a store in Birmingham vs when MB opened a store in Birmingham is irrelevant. MB's first "boutique" was opened in the early 1900's. Their first "flagship" store was opened in the late 1990's or early 2000's. Apple's first corporate store opened roughly around the same time. It's not germane to the discussion though. This is about business models. Apple's store model (notwithstanding the complaints) are very successful. In business terms, that's "profitable". They take in more money than they expend. That's not even their goal (which is why John Browett was let go). The purpose of an Apple Store is to expose buyers to the product, with little to no sales pressure, so that they buy the product somewhere (usually online at Apple.com).

 

Lots of other companies see Apple's success, and try to emulate their practices (i.e.: the earlier references to Samsung and Microsoft). Those other companies don't have the complete ecosystem Apple does, and I therefore can't see them succeeding. Montblanc appears to have been opening "boutiques" at a significant rate. I don't know what else explains their expenses this last year. Their revenue is relatively constant (if you haven't looked at the document linked, starting on page 18, then please do so or refer to the first paragraph and let me know...).

 

I don't see MB Boutiques being feasible, and nothing more than an unnecessary drain on profit. People can already try-out MB products in all kinds of places (and buy them cheaper there).

[TheModernGent]

 

I'm looking at this dispassionately, but you don't seem to be. I'm beginning to assume you're a MB fanboy. That's ok, but if that's the foundation your discussion will be built off of then there's no point to me bothering with it.

 

When Apple opened a store in Birmingham vs when MB opened a store in Birmingham is irrelevant. MB's first "boutique" was opened in the early 1900's. Their first "flagship" store was opened in the late 1990's or early 2000's. Apple's first corporate store opened roughly around the same time. It's not germane to the discussion though. This is about business models. Apple's store model (notwithstanding the complaints) are very successful. In business terms, that's "profitable". They take in more money than they expend. That's not even their goal (which is why John Browett was let go). The purpose of an Apple Store is to expose buyers to the product, with little to no sales pressure, so that they buy the product somewhere (usually online at Apple.com).

 

Lots of other companies see Apple's success, and try to emulate their practices (i.e.: the earlier references to Samsung and Microsoft). Those other companies don't have the complete ecosystem Apple does, and I therefore can't see them succeeding. Montblanc appears to have been opening "boutiques" at a significant rate. I don't know what else explains their expenses this last year. Their revenue is relatively constant (if you haven't looked at the document linked, starting on page 18, then please do so or refer to the first paragraph and let me know...).

 

I don't see MB Boutiques being feasible, and nothing more than an unnecessary drain on profit. People can already try-out MB products in all kinds of places (and buy them cheaper there).

+1

 

This same practice is going on in TONS of other industries and is the reason why a lot of long withstanding chains are shutting down stores. Look at Circuit City or Bestbuy (yes I know that these are independent retailers carrying other companies brands) but the same thing happened/is happening to them. Bestbuy has become a place to go and try before you buy (on Amazon usually LOL).

[fountainpende]

Re cheaper pens wasn't there talk of a cheaper line just ball / rollerball.

 

 

That was the Scenium that was introduced some years ago ... and then they stopped producing the pen very soon because it did not sell well.

 

Overall, let's not forget that Montblanc produces all kinds of products such as watches, jewelry, perfume etc. ... I would expect that the problems origin from all these brand extensions and not from pens ... as stated above by Zenistar ... the women's jewellery market might be one reason...

[chunya]

Sales have barely moved in three years, so there must be a reason for the massive decline in operating profits. Capital expenditure in opening new stores, introducing new lines? Massive severance pay cheques for ex Directors? That list of salaries makes interesting reading.

Edited June 3, 2014 by chunya