That's my theory anyway. Probably wrong lol.
Who is considering it a luxury brand? Maybe teenagers on the school playground, or in developing nations where a iWatch costs over a month's average wage (I'm from a developing nation).
But in the west (US, Sweden, etc) it's far from being a luxury brand of any kind. It's just a gadget/tech brand making stuff that almost anyone there can afford. Hardly comparable to something like LVMH.
Fashion aware people are mostly wearing traditional watches or go for colorful oversized G-Shocks if they're some celebrity looking to make a bold statement or something.
I recommend 'The Urban Gentry' on Youtube.
But Apple is not necessarily selling to watch aficionados, they are selling (partly) to people who want to be seen as fashionable in a general sense. Calling it "Apple Watch" instead of iWatch, and putting it next to Hermès straps is about adding that gleam of luxury and glamour.
That's funny. I'm not deep into the celebrity/fashion cult, but whenever I see interviews with various celebrities, actors, business people, fashion people, athletes, etc, they always wear some sort of Swiss/Japanese mechanical watch with their fashionable formal or casual attire, never an Apple watch.