Swatch to drop licence collaboration with Calvin Klein after 22 years

After more than 22 years of exclusive partnership, Swatch Group has decided not to renew its watch licensing agreement with Calvin Klein and will let the deal finish at its date of expiration “in the near future”.

The Swiss watchmaker – whose 18 brands extend from the ultra high-end Breguet to mass market Swatch – did not give a specific reason for the termination but commented: “The decision has been taken due to the recent turbulence and uncertainties at the management level of Calvin Klein Inc, New York.” Calvin Klein is owned by PVH whose other core fashion brand – with good visibility in travel retail – is Tommy Hilfiger.

With 2018 revenues of CHF8,475 million (US$8,575 million), up +5.7% year-on-year at constant exchange rates, Swatch Group is the world’s largest watchmaking group. It also operates the retail companies Tourbillon and Hour Passion.

Falling volumes

According to Morgan Stanley Equity Analysts Edouard Aubin and Elena Mariani the licence will move to US group Movado, whose licences include Coach, Ferrari, Hugo Boss, Lacoste and Tommy Hilfiger. Movado has not confirmed this tie-up.

In a research note, the analysts said: “Swatch does not mention why the licence is being allowed to expire.” In terms of the top line effect of the decision on Swatch, they added: “Swatch has never disclosed specific figures regarding the CK licence. However, we would estimate that, at its peak (about 10 to 15 years ago), Swatch was selling 1-1.3 million CK watches per annum; that sales were >CHF450 million(>US$456 million); and that the licence was nicely profitable.

Morgan Stanley estimates that the Calvin Klein business has fallen to about 2% of Swatch’s consolidated sales with a “likely nil” contribution to profits at the brand level

“By 2018, we estimate that volumes had fallen to 300-500,000 units – about 3.5% of Swatch Group’s total volumes – and that sales were more than likely below CHF200 million or about 2% of consolidated sales. Contribution to profits was likely nil at the brand level.”

Calvin Klein and Swatch Group first partnered in 1997 to create the contemporary cK watch brand, making it among the pioneers in the fashion accessory watch segment. In 2004 jewellery collections were added. Swatch now offers more 200 different items under the current licence.

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