World Economy

Swiss Watch Exports Slump

Swiss Watch Exports SlumpSwiss Watch Exports Slump

Swiss watch exports dropped in May, bringing the industry’s slump close to a full year as the industry faced plunging demand across Asia and Europe.

Shipments fell 9.7% to 1.56 million Swiss francs ($1.62 million), the Federation of the Swiss Watch Industry said in a statement Tuesday. Exports have declined for the past 11 months, and had back-to-back monthly double-digit declines in March and April, Bloomberg reported.

“The slowdown in Europe reflects the ongoing aftermath of the Paris and Brussels attacks, in the form of a slower tourist flow in Europe, and perhaps concerns that Chinese are buying less in Europe based on taxes imposed on them when they return home,” said Alessandro Migliorini, an analyst at Mirabaud Securities LLP. “It looks like it will be a worse year than 2015.”

Swiss watchmakers have been struggling with a wider slowdown in demand for timepieces across all of Switzerland’s main markets so far this year. Hublot and Zenith, owned by LVMH Moet Hennessy Louis Vuitton SE, have decided not to open any additional stores in Hong Kong amid a market that’s “more adapted for closing stores rather than opening stores,” watch chief Jean-Claude Biver said on June 13.

Timepieces with wholesale prices of 200 francs to 500 francs suffered the most, followed by those costing 3,000 francs and up, both posting double-digit declines.

The fall followed declines of 11.1% in April and 16.1% in March. Particularly badly hit have been China and Hong Kong, two of the world’s largest markets for luxury watches which are made by companies like Swatch, Richemont and LVMH Moet Hennessy Louis Vuitton, Reuters reported.

Exports to France fell 18.4% in May, according to figures from the Federation of the Swiss Watch Industry.

  Cutting Costs and Production

In response, watchmakers have been cutting costs and production as the industry faces its biggest slowdown since 2009 when the global financial crisis reduced demand for luxury watches.

Last month, Geneva-based Richemont said it expected business to remain tough in the months ahead, as it reported a 1% fall in its constant sales for the 12 months ended March 31.

The owner of Cartier and IWC brands said April had been particularly difficult with sales down 15% in the month when currency swings were removed.

Difficulties in Richemont’s watches business were exacerbated by inventories at retailers, which forced the company to buy back unsold watches.

No further job cuts were planned on top of the 500 cut last year, but more stores could close in China, Richemont said last month.