Amidst the economic turmoil and sluggish demand in China, sales of luxury Swiss watches have sharply declined.
This week, the latest data released by Switzerland’s two largest publicly traded watchmaking groups, Richemont and Swatch Group AG, confirmed a drastic downturn in the market dominated by China, dragging down luxury fashion brands such as Burberry Group Plc, Hugo Boss, and Gucci.
The latest financial reports reveal a double-digit decrease in watch sales.
On Tuesday, Richemont stated that the sales of its watch brands had dropped by 13% in the three months leading up to June, with a significant 27% decline in sales in the Greater China region. Swatch Group, apart from its entry-level brands Omega, Blancpain, and Breguet, also experienced a sudden 30% sales drop in China in the first half of the year. Overall sales decreased by 14%, with operating profit plummeting by 70%.
Nick Hayek, the CEO of Swatch Group, mentioned in an interview with Bloomberg this week that some of the group’s watch brands have delayed orders to suppliers as production is set to decrease by 20% to 30%.
“Some brands that rely on external suppliers have postponed certain orders,” Hayek said. “But I can tell you, not just us, the entire Swiss watch industry is facing this.”
While Richemont’s performance in Asia is negatively impacted by China, it has seen growth in other regions. “Sales growth in Korea and Malaysia partially offset the 27% decline in China, Hong Kong, and Macau combined,” the company reported.
Japan recorded the strongest regional sales growth at 59%. With the weakening yen, tourists seized the opportunity to purchase luxury goods, leading to a thriving retail business.
Surprisingly, sales in the United States showed a strong 10% growth, attributed to the continuous increase in domestic demand across various distribution channels. In 2021, the U.S. surpassed China to become the top export destination for watches. In Europe, sales increased by 5%.
However, these increases are not enough to offset the drag from the sluggish Chinese market.
According to a report by Bloomberg, analyst Luca Solca from Bernstein stated in a report following Swatch Group’s financial announcement, “We believe that the demand challenges in China will not end immediately.”
These challenges have also impacted the broader luxury goods industry. On Tuesday, German luxury fashion brand Hugo Boss lowered its profit guidance for the year citing weak markets such as China, causing its stock price to plummet to the lowest level since 2021. British Burberry Group issued a profit warning, leading to a significant drop in its stock price as well.