Zurich — Richemont subsidiary Cartier’s exhibit at
Geneva’s luxury watch show is usually packed with lavish, gem-encrusted
timepieces costing $100,000 or more. This year, most of the display
cases in the 170-year-old jewellery maker’s main hall were filled with
variations of one single model: the Panthere, which will go on sale in
June for as little as $4,000.
Cartier’s subdued display illustrates the more sober mood of Swiss watchmakers as they showcase their wares at the fair this week.
Vacheron Constantin said it was holding back on store openings amid job cuts, while Panerai was cutting its distribution network by as much as 10%. The retrenchment has been welcomed by investors, who have driven shares of watchmakers higher this year on the hope the worst may be over.
"Everything is still fragile," Vacheron Constantin CEO Juan-Carlos Torres said in an interview. "We’re more optimistic than last year, but not too much."
The Swiss watchmaking industry is emerging from its longest slump since the 1980s, when competition from cheap quartz watches nearly drove it out of business. The country’s exports of timepieces dropped 10% in the first 11 months of 2016, with full-year figures expected next week.
A year after the industry fretted over the threat of the Apple Watch and smartwatches in general, that concern has been replaced by the fallout from anaemic spending in China, tourists avoiding France in the wake of terrorist attacks and economic uncertainty in the US
Parmigiani Fleurier, whose watches on average cost about Sf30,000 ($30,000), said it was too risky to increase annual production because it wanted to avoid job cuts should the recovery relapse. Normally the watchmaker produces no more than 4,000 pieces a year.
‘Good signs’
"There are good signs of recovery, but it will not be easy," said Flavien Gigandet, a member of Parmigiani Fleurier’s executive committee. "We’re very careful to adapt production to demand to ensure nobody has to leave the company. I’m not overoptimistic."
The slump in demand led Richemont, which owns Cartier and Vacheron Constantin, to spend more than €200m buying back unsold watches sitting on retailers’ shelves. The Swiss luxury goods-maker, which makes timepieces under 12 brands, also cut about 200 watchmaking jobs.
Richemont said last week sales of watches at its own stores had stopped declining after a four-year slump in Chinese demand clobbered the industry. That spurred speculation that the market may rebound once the dip in sales to third-party retailers reverses.
Richemont shares have gained 13% this year, while Swatch Group is up 8.9%, after three years of declines for both stocks. By reining in production, watchmakers were starting to adjust to lower demand, said Jean-Paul Jeckelmann, who helps manage $1.5bn in equities as Banque Bonhote’s chief investment officer in Neuchatel, Switzerland.
"Capacities have been aggressively increased in the last few years and have to be absorbed," he said. "We’re getting closer to equilibrium."
‘Richest people’
Some watchmakers are looking to the US to offset weak demand in Hong Kong. Christophe Claret, founder of the namesake watchmaker with average prices of Sf168,000, said president-elect Donald Trump could spur demand by cutting taxes on wealthy Americans. Swiss watch exports to that market dropped 11% to end-November.
"In this country, you have the richest people of the world," Claret said. "If they’re free to spend, they will buy more watches."
The rebound depended on whether the biggest watchmakers managed to tame the glut in high-end timepieces, said Vanessa Monestel, CEO of Laurent Ferrier, one of the industry’s youngest brands. Since it started in 2010, the watchmaker has produced fewer than 700 pieces that sell on average for Sf50,000-Sf60,000.
"The big turnaround, I really don’t see it, it’ll take time," she said. "But if the inventory clean-up by bigger brands was done properly, then I can see some growth for the industry this year."
Bloomberg/BDlive
Cartier’s subdued display illustrates the more sober mood of Swiss watchmakers as they showcase their wares at the fair this week.
Vacheron Constantin said it was holding back on store openings amid job cuts, while Panerai was cutting its distribution network by as much as 10%. The retrenchment has been welcomed by investors, who have driven shares of watchmakers higher this year on the hope the worst may be over.
"Everything is still fragile," Vacheron Constantin CEO Juan-Carlos Torres said in an interview. "We’re more optimistic than last year, but not too much."
The Swiss watchmaking industry is emerging from its longest slump since the 1980s, when competition from cheap quartz watches nearly drove it out of business. The country’s exports of timepieces dropped 10% in the first 11 months of 2016, with full-year figures expected next week.
A year after the industry fretted over the threat of the Apple Watch and smartwatches in general, that concern has been replaced by the fallout from anaemic spending in China, tourists avoiding France in the wake of terrorist attacks and economic uncertainty in the US
Parmigiani Fleurier, whose watches on average cost about Sf30,000 ($30,000), said it was too risky to increase annual production because it wanted to avoid job cuts should the recovery relapse. Normally the watchmaker produces no more than 4,000 pieces a year.
‘Good signs’
"There are good signs of recovery, but it will not be easy," said Flavien Gigandet, a member of Parmigiani Fleurier’s executive committee. "We’re very careful to adapt production to demand to ensure nobody has to leave the company. I’m not overoptimistic."
The slump in demand led Richemont, which owns Cartier and Vacheron Constantin, to spend more than €200m buying back unsold watches sitting on retailers’ shelves. The Swiss luxury goods-maker, which makes timepieces under 12 brands, also cut about 200 watchmaking jobs.
Richemont said last week sales of watches at its own stores had stopped declining after a four-year slump in Chinese demand clobbered the industry. That spurred speculation that the market may rebound once the dip in sales to third-party retailers reverses.
Richemont shares have gained 13% this year, while Swatch Group is up 8.9%, after three years of declines for both stocks. By reining in production, watchmakers were starting to adjust to lower demand, said Jean-Paul Jeckelmann, who helps manage $1.5bn in equities as Banque Bonhote’s chief investment officer in Neuchatel, Switzerland.
"Capacities have been aggressively increased in the last few years and have to be absorbed," he said. "We’re getting closer to equilibrium."
‘Richest people’
Some watchmakers are looking to the US to offset weak demand in Hong Kong. Christophe Claret, founder of the namesake watchmaker with average prices of Sf168,000, said president-elect Donald Trump could spur demand by cutting taxes on wealthy Americans. Swiss watch exports to that market dropped 11% to end-November.
"In this country, you have the richest people of the world," Claret said. "If they’re free to spend, they will buy more watches."
The rebound depended on whether the biggest watchmakers managed to tame the glut in high-end timepieces, said Vanessa Monestel, CEO of Laurent Ferrier, one of the industry’s youngest brands. Since it started in 2010, the watchmaker has produced fewer than 700 pieces that sell on average for Sf50,000-Sf60,000.
"The big turnaround, I really don’t see it, it’ll take time," she said. "But if the inventory clean-up by bigger brands was done properly, then I can see some growth for the industry this year."
Bloomberg/BDlive
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