Swiss watch exports faced a downturn in May, marked by a 2.2 percent decrease in value to 2.3 billion Swiss francs ($2.6 billion) compared to the previous year, reported the Federation of the Swiss Watch Industry on Thursday. This decline reflects a continued ebb in demand for premium and luxury timepieces in key markets such as China and Hong Kong.
In mainland China, the second-largest market after the US, exports plummeted by 18 percent by wholesale value, influenced by a downturn in real estate values which dampened consumer sentiment. Meanwhile, shipments to Hong Kong, a pivotal watch-trading hub, dropped sharply by 23 percent.
The recent figures underscore a broader trend of weakened demand for high-end watches following an initial surge post-Covid lockdowns. Factors contributing to this decline include cautious consumer spending amid higher interest rates, uncertain economic conditions, and geopolitical tensions. Furthermore, the strength of the Swiss franc against other currencies has led to price increases in certain markets, dissuading potential buyers.
After achieving a record high in 2023, Swiss watch exports have now decreased by 2.5 percent in the first five months of 2024, totaling approximately 10 billion francs.
The dip in May follows a surprising uptick in April, driven by renewed demand from the US, although exports to the US remained stagnant in May.
Commenting on the sector’s performance, Vontobel analyst Jean-Philippe Bertschy highlighted the notable decline in demand within the mid-price segment of the market.
Analysts, including Thomas Chauvet from Citigroup, foresee potential implications for luxury brands like Richemont, owner of Cartier and Vacheron Constantin, as well as Swatch Group AG, known for brands such as Omega and Longines.
“With Richemont and Swatch’s significant exposure to a subdued Chinese consumer, downside risks are apparent,” noted Chauvet in a recent report.
Following the export report, shares of Richemont initially dipped in Zurich but later rebounded slightly during mid-morning trading following an interest rate cut by the Swiss National Bank.
Similarly, Swatch Group shares also saw a modest recovery after the rate adjustment, trading down 0.3 percent by mid-morning.
While exports of high-priced watches above 3,000 francs demonstrated resilience in May with a 0.7 percent increase in value, shipments in terms of unit numbers fell by 4.9 percent. In contrast, watches priced between 500 francs and 3,000 francs saw a significant decline of 16 percent in wholesale value. Watches priced below 200 francs, driven by collaborations by Swatch Group AG’s Omega and Blancpain, experienced a milder decrease of 1.2 percent by value.
In response to market challenges, Swiss watchmakers such as Rolex and Patek Philippe have adjusted by raising prices and focusing on higher-end timepieces to sustain sales growth amidst the prevailing economic headwinds.
Related Topics:
