Swiss Watch Sales Drop 9.9% In 2016

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Swiss watch exports in sharpest fall since financial crisis

Luxury groups grapple with ‘crisis of the Chinese wrist’ as Hong Kong shipments decline 25%

Trading had “remained difficult throughout the year” in 2016 as demand fell, the Federation of the Swiss Watch Industry (FHS) said on Thursday, “especially for the most expensive products”. It said changing consumption habits, the strength of the Swiss franc and the decline of tourism in Europe also hurt sales.

The figures come after the Salon International de la Haute Horlogerie watch fair in Geneva last week, where luxury brand executives were clear about why the fall had been so sustained.

Daniel Riedo, chief executive of Jaeger-LeCoultre, said there had been complacency among brands: “The luxury market is sometimes a bit greedy and when you have five years of double-digit growth you have . . . bad habits.” He added that watchmakers had to relearn how to sell to Hong Kongers, now that mainland Chinese were not visiting the territory in such high numbers.

Total exports in 2016 were SFr19.4bn ($19.4bn), their lowest level since 2011, and 13 of the 15 biggest markets had contracted, the FHS said on Thursday. Shipments to Hong Kong, the largest market, declined 25 per cent and have now fallen by half in four years, to SFr2.4bn. Exports to the US dropped 9.1 per cent.


Although exports to China fell 3.3 per cent year on year, the industry reported a strong second half — up 9.1 per cent — as mainland residents opted to buy their luxury goods at home. Among the biggest markets, only the UK and South Korea expanded, each by 3.7 per cent.

Sandrine Donguy, marketing director of Baume et Mercier, said the industry was experiencing “the crisis of the Chinese wrist — it’s in Hong Kong where we’re suffering the most and where we’re most exposed”. One reason is currency: since 2014 the renminbi has gone from buying HK$1.28 to HK$1.13, reducing mainlanders’ purchasing power in the territory.

In May last year luxury conglomerate Richemont said it had taken the “exceptional measure” of buying back stock from some of its Hong Kong dealers — and in some cases, destroying it — as sales had fallen so sharply there.

Sales trends in greater China have also changed as a result of the government’s crackdown on lavish “gifting” to officials or businesspeople. Philippe Léopold-Metzger, chief executive of Piaget, said his brand was selling fewer gold or diamond-set watches as consumers bought lower-priced timepieces. He added that his brand’s prices in China were “a little bit more expensive than the UK, France or Switzerland”.

Moreover, last year the Chinese government doubled the import tariff on luxury watches to 60 per cent to promote domestic consumption. Chinese buyers around the world account for more than half of watch sales, according to Mr Riedo.

The only significant market which has expanded over the past year is the UK. The post-referendum fall in the pound has coincided with the opening of several new and luxurious watch shops, reaping the benefit of increased tourism.

The FHS said forecasting for 2017 was “very difficult” because of “the complex and uncertain environment”, as well as structural factors. But some analysts have seen cause for optimism.

Luca Solca, head of luxury goods research at investment bank Exane BNP Paribas, said: “The watch industry appears closer to a trough, as Swiss export declines continue to reduce — while still mid-single-digit negative in December.” He added: “China is in good shape. Field research in Hong Kong shows that even there, watch sales were finally positive in the last months of the year.”

Jean-Claude Biver, head of the watch division at luxury group LVMH, whose brands had set out their stall on a boat moored in Lake Geneva, said he was optimistic for 2017, feeling that “we have reached the bottom in China”, and predicted 5 per cent growth there this year.

Copyright The Financial Times Limited 2017.