Luxury watch market ticks up ahead of time, thanks to Chinese orders

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A big jump in orders from China has put the global market for luxury timepieces back on its feet sooner than expected, after having languished for more than two years.
PHOTO: REUTERS

A BIG jump in orders from China has put the global market for luxury timepieces back on its feet sooner than expected, after having languished for more than two years.

This should be good news for the Singapore market, which is among the world’s 10 biggest, and one of four among the 10 to have posted growth so far this year.

Switzerland is virtually the sole supplier of such timepieces, and the Chinese snap up the bulk of them; not only do the Chinese import the watches, they buy them on their travels to major watch markets such as Singapore.

Sales of Swiss watches went into free fall during the 2008 global recession, but this didn’t last long. Strong orders from China and Hong Kong in the following year arrested the dive and pulled Swiss exports up 22.7 per cent year on year

A slump in the market in the last two years was due in large part to China’s crackdown on corruption, which shrank Chinese orders.

But it looks like China has come to the rescue of the Swiss once more, as Richemont Group chief financial officer Gary Saage told financial analysts in mid-May: “Mainland China has been really quite strong and has been for nine months.” Richemont is one of the two biggest Swiss producers of luxury timepieces; the other is the Swatch Group. Mr Saage’s remark came at around the time the Federation of the Swiss Watch Industry reported that shipments to the mainland surged 39 per cent in April. This strong double-digit growth continued for the next three months; shipments in July saw a 22.3 per cent jump.

In the first seven months of this year, Swiss watch exports to China rose 21.8 per cent to 850.1 million Swiss francs (S$1.19 billion), said the federation.

Swiss watch exports globally have yet to return to their pre-slump level, but they have been growing for three straight months so far. Shipments were up 3.4 per cent in July; in the first seven months of this year, Swiss watch exports expanded 0.7 per cent to 10.31 billion francs.

The expansion in value terms was backed by mechanical watches, which grew 2 per cent; quartz products lost ground (minus 4.5 per cent). Gold watch shipments fell in value but exports of steel timepieces expanded; exports of platinum and bimetal models also rose.

Watches priced under 200 francs (export price) were the only category to decline, shedding 11.2 per cent in value. Those in the 200-500 franc price range rose 3 per cent; watches priced above 500 francs posted a 1.3 per cent gain.

Among the top 10 markets, Swiss watch exports were still down in the US (minus 4.8 per cent), Italy (minus 2.1 per cent), Japan (minus 9.9 per cent), Germany (minus 3.3 per cent), France (minus 3.7 per cent) and UAE (minus 7.4 per cent).

But the Swiss watch federation thinks the worst is over – and sooner than expected. It said: “Although Swiss watch industry exports are not equally dynamic everywhere, their overall trend has stabilised . . . This stabilisation had not been expected before the end of the year.”

Swatch chief executive Nick Hayek predicted in March that Swiss watch sales would rise by 5-10 per cent this year. Richemont chairman Johann Rupert, who thinks the root of the problem is over-production, envisages a gradual recovery.

Thanks to a favourable base effect, Swiss shipments to Hong Kong (Switzerland’s biggest watch market) jumped 16.8 per cent in July and 2.9 per cent between January and July.

Even the UK, which registered an 8.5 per cent fall in shipments in July, grew 12.1 per cent in the first seven months because of an under-value pound.

Swiss watch shipments to Singapore rose 3.8 per cent in July, and by 0.9 per cent in the first seven months to 574.5 million francs. Exports to Singapore barely grew in 2015 and tumbled 10.4 per cent in 2016.

Singapore retailers now no longer moan over poor sales, but are remaining cautious. “Prudent growth” is the catch phrase for The Hour Glass this year. Singapore’s largest retail watch chain reported that, for the financial year ended March 2017, sales shrank by 2 per cent to S$696.1 million, and after-tax profit fell 7 per cent to S$49.6 million.

Cortina Holdings, the next biggest local watch chain, halted two straight years of decline to announce that sales climbed 6 per cent to S$390.8 million for the financial year ended March 2017. Net profit jumped 47 per cent to S$12.5 million. It put this down to its new and refurbished stores and marketing efforts.

By Chuang Peck Ming Courtesy The Business Times

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