Swiss Watch Export 2016 report: Worst Performance since Financial Crisis

Swiss Watch Export 2016 report available through Bloomberg Terminal have recently pointed to harsh conditions analysts are calling the worst performance since the Financial Crisis. At a glance, the most glaring figures on the Swiss Watch Export 2016 report point to Russia down 43% year on year although December 2016 registered a 13.4% uptick; India following downward 31% year on year while December 2016 saw 8.9% increase; Meanwhile, Saudi Arabia, a country typically flush with oil resources saw a drop amidst recovering crude prices at 29.2% year on year while December 2016 saw 27.5%. That said, while these numbers are glaring, they are not the industry’s biggest markets.

With Swiss Watch Exports falling 9.9% in 2016, the biggest drop since the Financial Crisis, Hong Kong, typically the industry’s most fertile grounds, was down 15.7%, followed by 5th and 6th ranked markets – United Kingdom and Singapore, down 7.8% and 9.7% respectively.

Also, hit, precious metal watches are harshly down 14% year on year but the Federation of the Swiss Watch Industry largely expects Swiss Watch Exports to stabilise by 2017. 

 

Swiss Watch Export 2016 overview

As reported by the Federation of the Swiss Watch Industry on Thursday 26 January 2017, Swiss Watch Exports declined USD 19.4 billion in December, the worst annual performance, beating the 22% fall in 2009 during the global financial crisis.

The fall is largely due to weaker global economic conditions but mostly in part to the Swiss watch industry’s overall reliance on a single market since the early 2000s – China. Following the Chinese Communist Party’s crackdown on graft, bribery (usually through excessive gift giving) and a public relations effort to reduce perceptions of extravagance of a rapidly growing class of Chinese elites, the industry, in particular Richemont, has seen widespread production cuts and retrenchment.

Swiss Watch Export 2016 report also shows that after 4 years of weak performance, the Hong Kong market has been cut in half. Meanwhile Richemont has spent USD215 million on buy back programs to assist retailers with unsold stock while it is in the midst of finalising plans to cut at least 200 jobs across Cartier, Vacheron Constantin and Piaget.

The news comes amidst another massive shake-up at Richemont Group with Business of Fashion reporting the departure of four chief executive officers: Jaeger-LeCoultre’s Daniel Riedo is leaving for other opportunities by the end of February. Meanwhile Chief Executives Juan-Carlos Torres and Philippe Leopold-Metzger are retiring but retaining their roles as non-executive presidents of the brands. The fourth departure pertains to Dunhill, not part of the watchmaking portfolio. Richemont Chairman Johann Rupert is largely rumoured to be looking for new Chief Executives who are more in touch with the next generation of luxury consumers. That said, the four CEOs vacating were jointly responsible for close to 15% of total group business thus the short term outlook for Richemont Group is not especially promising. Cartier, the Group’s traditional star performer has under the auspices of Cyrille Vigneron been focusing on less expensive models in contrary to the 2012 – 2014 push on high horology concepts like the ID Concept and Cartier Astrocalendaire as designed by Head of Fine Watchmaking, Carole Forrestier-Kasapi.

Swiss Watch Exports likely to stabilise in 2017

According to the watch federation, signs of a rebound come as Richemont Group begins to report strong recovery in their brand mono-boutiques in the last three months of 2016 with December posting strong gains, likely on the back of Christmas gift giving and the return of Chinese shopping with China rising 9.1% to 27.6% year on year with CHF139.6 million. The United States did well as well with 10.9% year on year totalling CHF 179.1 million.