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Early 2017 Swiss Watch Exports Continue to Fall while LVMH Bucks the Trend

by Jonathan Ho on April 12, 2017

Swiss watch exports further declined in February 2017. Compared to the same period 2016, total export value of CHF 1.5 billion was 10% lower and while in line with the down-trend reported previously, as a surprise as analysts had believed the fall had plateaued.

Precious metals were once again a major factor contributing to the fall in Swiss watch exports but other metals were also severely affected even if their impact was not as great. Overall volumes were also down, suppressed by Other materials and Other metals categories.

That said, while there was a slight uptick in the entry-tier towards the last quarter of 2016, the down-trend is now looking more severe at both ends of the price spectrum. Swiss watch exports of timepieces priced less than CHF200 dropped more than 20% while watches priced over CHF3000 saw a fall of 11.9%.

Early 2017 Swiss Watch Exports Continue to Fall while LVMH Bucks the Trend

The bright spark however is that Swiss watch exports to China and United Kingdom are picking up again with percentage value increase of 6.7% and 1.9% respectively though given the relative percentage export share of 7.2% and 6.4%, it’s looking like they’re not going to lift the industry any time soon. With global share of 9.9%, United States leads the biggest fall with 26.2%. Hong Kong has a 12.5% share and is down 12.1%.

Not even a Pour Le Merite calibre and I feel lost already.

Another silver lining is appearing at LVMH Watch & Jewellery Division which reported better than expected performance for the first quarter of 2017. LVMH, parent company for watch brands like Bulgari, Hublot, TAG Heuer and Zenith are doing comparatively well to the competition with Bulgari and TAG Heuer making impressive market share gains.

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For LVMH Watch Division, quarterly revenues were up 11%, inspiring given the tepid if not downright hostile economic conditions in the industry. That said, the uptick while positive is merely an improvement of 5% revenue growth announced last year – thus, it follows that there was room to grow and it didn’t grow that much.

That said, Swatch Group CEO was recently quoted in HH Mag that, “Trends are impossible to predict at the moment,” and LVMH analysts seem to agree with the cautious caveat that, “The trend currently observed cannot reasonably be extrapolated for the full year.”

Meanwhile, rival groups Richemont (with its stable of higher end brands) and Swatch Group (with a portfolio of diversified watchmakers) are delivering mixed results. Watch and Jewellery sales are still down at Richemont but thankfully buttressed by an uptick in jewellery sales, helped by brands like Van Cleef & Arpels to a tune of 6% growth. Swatch Group reported mixed results with negative net sales but positive net margins.

  • Net Sales: -10.6% compared to 2015 and -13.3% compared to 2014
  • Net profit margin: 7.9%, an almost 50% smaller profit margin than a year ago
  • The months of November, December and January showed good growth in Mainland China

Given that Swatch Group is the largest global producer of watches by value with sales representing close to 19% of the total global value of watch sales and approximately 35% of the Swiss watch industry sales, it is telling of the greater economic conditions ahead when CEO Marc Hayek is not feeling particularly confident for 2017.

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