Daily Management Review

Swiss watch exports continues to fall


08/23/2016


Federation of the Swiss watch industry has recorded the thirteenth consecutive monthly decline in exports. In July, exports totaled 1.6 billion Swiss francs, which is 14.2% lower than a year earlier.



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On Tuesday, Federation of the Swiss watch industry published its latest monthly report, from which it follows that exports of Swiss watch fell again. Volume of exports in July amounted to 1.6 billion Swiss francs, which means that the drop compared to the same period last year was 14.2%.

The Federation said that the most serious decline in exports was observed in the key industrial regions - Hong Kong (32.7%) and the United States (14.7%). Britain was a pleasant exception since the pound cheapened after the Brexit referendum provoked shipment growth of 13.4% to 110.2 million Swiss francs. Back in July, CEO of the largest manufacturer of Swiss watches Swatch Group Nicolas Hayek said that Brexit made "a fantastic result in the UK", mentioning in particular that London store Breguet, included in the Swatch Group, recorded 40% sales growth after the referendum. However, according to experts, such changes in sales volumes associated with exchange rate fluctuations most likely will not have a lasting effect.

The Federation particularly marked the fourth consecutive drop in exports watch made of precious metals. Almost identical decline of 16% drop was also observed in the opposite price segments (watch priced less than $ 200 and more than $ 3000).

Experts say the fall was triggered by a number of reasons - too high exchange rate of the Swiss franc, reduction in demand in key markets, and general economic uncertainty.

Shares of Swatch Group (Swatch, Omega, Breguet, Harry Winston etc.) in Zurich fell 0.74%, papers of another major manufacturer of Swiss watches, Richemont (Cartier, Montblanc, Piaget, etc.) dropped by 0,51%, while LVMH (brand Zenith, Bvlgari, Hublot Chaumet) rose 0.67% in Paris.

Apart from Swiss watch, there is another, often neglected, category. German watch industry is not as big and not as well-known as the Swiss, yet, Bloomberg experts say it rather helps the Germans.

Ten manufacturers from small town Glashütte in the past year manufactured 32 thousand watches, total cost of which is estimated at about € 500 million. The German watch industry is not even comparable with the Swiss, yet it feels not much better. Richemont Group, owner of some of the leading Swiss watch brands, declared a reduction of at least 350 jobs in Switzerland. On the contrary, two largest watch companies of Glashütte, conversely, recruited new employees. The Swiss watch export in 2015 shrunk to 3.3%, while deliveries from Germany leaped up 14%. The reasons are obvious. German watchmakers are almost not tied to China, which holds its anticorruption campaign, bad for sales. In addition, nearly all the expenses of German watchmakers are counted in euro, which allows them to somehow restrain costs. The Swiss, with their ever-growing franc, find it much more difficult.

However, experts say, the luxury watch market is global, and the Germans may well soon experience the same problems that have plagued their Swiss colleagues. Analyst of Zurich Bank Vontobel AG René Weber believes that the terrorist attacks in Paris and Brussels would play a negative role. Apart from that, the watchmakers from Glashütte will have to notice falling demand in Asia, too.

German watchmaking industry dates back to the middle of the XIX century. It died out after World War II, and resumed only after the reunification of Germany. German watchmaking miracle has been noted in Switzerland, and two Swiss giants (and competitors) of the watch market - Swatch Group and Compagnie Financiere Richemont SA - bought leading German watchmakers from Glashütte. The Swatch brand list now includes Glashuette Original and Union Glashuette, while Richemont become an owner of a local leading watch company - A. Lange & Soehne AG.

source: ft.com, bloomberg.com






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