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Pen Views

August 2009

Troubling times for pen companies

In August 2009, Sanford, the company that owns Parker, Waterman and other lines of pens, announced it may close the Parker production plan in Janesville..

“A careful and thorough review of our office products business indicates a need to further improve efficiencies in order to remain competitive in a challenging economy,” the statement says. “As a result, we are considering the consolidation of administrative and manufacturing operations from our Janesville, Wis., facility into other company locations with excess capacity. ... It is important to note that no final decision has been made at this time, and we are currently discussing options with employee representatives.”

The decision to close or note would be made in the next month or so, however, it is a reflection of the troubling times.

Somewhat similar events took place with A.T. Cross. That company closed several retails stores and laid off workers at its Lincoln manufacturing headquarters after moving operations to China over the past year. By the 2nd Quarter of 2009 A.T. Cross reported earnings down by 66%. Sales fell by 13.7%.

“During the second quarter, the recession continued and consumers and retailers remained very conservative with regard to purchasing discretionary products. Importantly, we continued to invest in our brands and manage our inventory and expenses appropriately.”
David G. Whalen, A.T. Cross’President and CEO

In May 2009, Richemont, an high-end luxury goods company that includes jewelry and high end pens such as Montblanc, announced a 31% drop in profits. The company notes that in the previous year, the Montblanc products line was broadened to include watches. That was a successful decision and resulted in a profit. Richemont has been closing stores, some 62 shores over the last two years. The closures include 34 Montblanc shops.

Brands such as Montblanc and Alfred Dunhill have experienced a 26% drops in sales -- now when the company reports sales for these brands they do include more than just pens.

In August 2009 Richemont sold Montegrappa pen to the Aquila Group after they concluded they would not carry the line any longer. (I am visiting with the CEO of Montegrappa in September and will write about that visit when I return).

Richemont groups its various product lines into "houses", and the Writing Instrument House is the business primary involved with the design, manufacture and distribution of writing instruments, and in their case, namely Montblanc. The Writing Instrument Maison holds 11% of total sales for Richemont. Richemont's Annual report reports sales for writing instruments down by 6% and Operating Results down by 45% for this group. Whle Montblanc's sales decreased by 6%, the larger drop in operating results reflects the additional costs of operating Montblanc's own boutique stores. Sales did not cover operating costs.

2008 was an important year for Montblanc, in which the Maison intensified its strategic efforts to align the quality of its distribution with its growing reputation as a diversified luxury goods Maison. As a consequence of these efforts, the number of points of sale has been reduced by more than one-third over the last 24 months.

Part of the Richemont strategy is to reduce the number of points of sale. Included in the writing instrument maison grouping are sales of leather goods, watches and Montblanc's jewellery lines.

Richemont reported that for the first time in more than 100 years, writing instruments account for less than half of this group's sales.

China is now considered the most important market for Montblanc, and they have opened 91 Montblanc boutiques in that country.

China is where much of the expansion of OMAS is taking place. Xinyu Hengdeli Holdings, which owns 90% of OMAS, reports making significant restructuring to OMAS in terms of brand features and marketing strategies and defining its new position to expand to other high-end consumer goods in addition to writing instruments. As of the end of 2008 OMAS opened 23 shops in China and has been reporting a steady growth in sales. I will watch for the 2009 Annual Report to see the trend of sales.

Other large groups, such as Newell, owners of such lines as Waterman and Parker report that overall sales fell by 17.6%, however, the reports did not indicate what percentage of sales the writing instruments make up of overall business.

The trend of the various reports indicate troubling times for the pen business. Store owners I talk to say sales are there, but not in the volumne seen in previous years, and high end pens are especially hard to sell.

Enjoy your pens! Your pen, an expression of you.