How The Hour Glass Manages a Downturn

The Hour Glass Logo

We all know the luxury watch industry is cylindrical. With the luxury watch market facing headwinds, The Hour Glass announced a decline in net profit after tax by 10% for the financial year ended 31st March 2016.

What I like about the The Hour Glass is their prudent management. In the current market downturn, the senior management team brainstorm for ways to transform the way they do their business. The team looked at ways to achieving operational efficiency by performing an internal review of company policies and processes.

These are some of the steps taken by the management:

1. Fix Legacy Systems

By reorganizing the data and approval flow for payroll, The Hour Glass is able to save over 30 man days every year.

2. New Employee Development Initiative

The Hour Glass introduced new employee development initiatives aimed at retail succession and creating multiple career pathways for sales personnel to remain committed to the organization. What I noticed about The Hour Glass is the senior management is made up of majority of staff above 60 years old. Millennials make up 40% of the organization’s team composition. GenXers make up 45% and Baby Boomers make up 15%.

Personally, I can see the importance of laying a career path for the younger generation in order to retain them with the company. We all understand how costly it is to lose staff you have trained over the years.

3. Upgrade Technology Platforms

The Hour Glass will upgrade the current technological platforms and base ERP (Enterprise Resource Planning) infrastructure to achieve better operational efficiency. Currently, luxury watches are only sold in traditional physical stores. Perhaps we may see online platforms offering online sale of luxury watches?

4. Prepare for Contingency

The management foresee that access to funding may be curtailed in the coming years due to softening economy. Thus, they have worked with banks to prepare extra lines of credit. They have launched a $500 million medium term note programme in the event The Hour Glass needs to respond to any opportunity that may arise in the coming years.

Currently, The Hour Glass makes up 4% of my stock portfolio. Estimated 2.5% dividend yield. Vested for dividend + growth.