The demand for high-end and luxury watches in China and Hong Kong continues to decline, leading to a noticeable drop in Swiss watch exports in May.
According to Bloomberg, the Swiss Watch Industry Federation reported on Thursday (June 20) that exports in May fell by 2.2% compared to the same period last year, reaching 2.3 billion Swiss francs (26 billion US dollars). In mainland China, the decline in housing prices has dampened consumer confidence, leading to an 18% decrease in Swiss watch exports to China, and a sharp 23% drop in shipments to Hong Kong, a major watch trading center.
After the end of the lockdown in mainland China, there was a surge in demand for expensive watches, which has gradually weakened until now. Against a backdrop of rising interest rates, declining economic growth, and geopolitical conflicts, the latest data reflects the current situation.
The Swiss franc’s appreciation against other currencies and its continued strength have had a negative impact on watch manufacturers, as the franc’s appreciation has led to price increases for Swiss watches in some markets, scaring away some customers. Following a record high in 2023, Swiss watch exports in the first five months of this year have decreased by 2.5%, totaling around 10 billion francs.
The decline in exports in May followed an unexpected growth in April, which benefited from the recovery of the US economy. Exports to the United States remained steady in May.
Citigroup analyst Thomas Chauvet stated in a report that these data could affect growth forecasts for brands owned by the Richemont Group, such as Cartier and Vacheron Constantin, as well as brands owned by the Swatch Group, including Omega and Longines.
“Due to Richemont Group and Swatch Group’s certain reliance on the sluggish Chinese consumer market, we see their downside risks.” the Citigroup analyst remarked.
Shares of Richemont Group fell in Zurich trading, but rebounded and slightly increased in morning trading following the Swiss National Bank’s interest rate cut. Swatch Group’s stock also reduced its decline after the rate cut.
In May, exports of expensive watches priced over 3,000 francs showed some strong momentum, with a value increase of 0.7%, but a decrease in quantity by 4.9%.
Swiss watchmakers such as Rolex and Patek Philippe have been raising prices and producing more expensive watches to maintain sales growth during economic downturns.
Shipments of watches priced between 500 and 3,000 francs wholesale decreased by 16%, while shipments of watches priced below 200 francs (affected by collaborations between the Swatch Group and Omega, and Blancpain) decreased by 1.2%.