Was it management, the organization or just the business?
"For centuries Waterford Crystal has captured light over and over again. In the hands of artists consumed by their craft, light has embroidered, danced and cascaded through beautifully cut crystal," explains the annual report of (April) 2008.
According to information on the site, Waterford Wedgwood plc was established in 1986 with the merger of (the Irish) Waterford Glass Group and (the British) Wedgwood. The mission statement
on the site reads: "To continue to be the world's leading portfolio of luxury lifestyle brands with particular emphasis on tabletop, gifting and the home."
When did that mission become impossible? The company is struggling to survive since 2001. Was, in the context of the bridal market which was the dominant market for the company products (crystal and china), the marriage between crystal and china not a perfect one?
Or did it make the bridal business all more vulnerable? A package deal where – like in the financial parallel – companies want to offer it all but where the clients-preferences are changing.
The situation of 1986 is quite different from that in 2008. In 1986 the long term boom only just started and luxury became hot where companies like Gucci entered the stock market.
It is not curious that the best years where at the top of the internet-bubble in 2001. Everything was still possible.
But the market preferences and structure has been changing since. The final blow came from the last three month of 2008 where the credit-crunch and the dependency of a single credit supplier (Bank of America) made the last hope disappear.
The former CEO steps down after delivering the financial report of 2008 which finishes in April and David W Scully is appointed in August as the new CEO.
David W. Sculley Group CEO (62), is a partner in the investment firm, Sculley Brothers. He joined the Group as a Director in 1997. He serves on the boards of several private companies. Mr. Sculley was a cum laude graduate of Harvard University with a degree in economics. Prior to forming Sculley Brothers, he was a senior executive with Heinz where he served as a director.
From the annual report the CFO acknowledges that the early evidence of a return to financial health declared in last year's results was premature.
The annual report is quite open about the problems that have been faced. The financial results for the year ended 5 April 2008, are very disappointing, with the Group reporting a pre-exceptional loss of EUR31.6 million at the EBITDA level (earnings before interest, taxation, depreciation and amortization) compared with a profit of EUR15.0 million in the prior year. The loss for the year was EUR232.8 million compared to a loss of EUR71.2 million in the prior year. Both main divisions declined in sales: the crystal division by 15% (170 million euros) and the ceramics division by 8% (462 million).
In the same report the risks and uncertainties were defined:
- Luxury goods, typically discretionary purchases … sensitive to trends in the general economy.
- a strong competition … manufactured in countries with significantly lower labor costs.
- currencies other than the euro (US dollars, UK pounds sterling and Japanese yen).
- the strength of the brands … protecting intellectual property rights.
- the need to manage the portfolio of brands, patterns and designs … on its own and through collaboration and through brand extensions and licensing arrangements.
- inventory management shown critical for sales
- Dependence (time to market / quality) of suppliers of raw materials and outsourced products to meet our delivery requirements.
- complementary distribution channels rather than the traditional department store
- efficient and effective management of manufacturing facilities
- the ability to access additional financing.
These risks show that the changing market factor had a decisive stake in the decline of the results.
This is also what journalists (reports) seem to indicate: "Ireland's Waterford Wedgwood, which luxury tableware was once a mainstay of wedding gift lists worldwide, has called in receivers …" (2)
A burden of debt made it impossible to continue in a financial market where cash is king: Waterford crystal is one of Ireland's most famous brands.
It is especially a pity knowing that the owner "of British potter Wedgwood was founded 250 years ago by Josiah Wedgwood
– one of the fathers of the industrial revolution. "
According to the report the group has some 8,000 employees worldwide: … 1,900 manufacturing in the United Kingdom, 800 in Ireland … 1,000 workers at Germany-based porcelain maker Rosenthal.
It was trying to modernize its product range "just as the economic downturn in its main markets – Britain and the United States – and the strength of the euro hit earnings, while the credit crisis made talks with lenders more difficult" …
The shares have been in decline since 2001 and on the site the stock price is shown in decimals: 0.01 cents …
A pity for those who value craftsmanship (as a professional competency) and tradition in a marketplace where there is little space left for style.
The other day I was watching the news' year concert on television and I found many people wearing just a sweater, and not the traditional suit. People do not know how to value a tradition; who is lost here; the market or the craftsman?
It seems all too clear a signal off our changing times we live in.