The export figures of Swiss watches have just been published by the Swiss Watch Federation (FHS) and they are confirming a negative trend. The export figures were down at -7.2% for June and -3.3% since beginning of the year in value and -9.9% in volume year to date.

A high comparison basis after a record year

Before we dive into the figures for June and the records on the first semester, here are a few preliminary remarks:

● All the figures we are discussing here are based on export prices and volumes. These are not (at least for the vast majority) the final consumer sales but are instead wholesale trades, which can either be subsidiaries (e.g. Swatch Group USA) or retailers (e.g. Watches of Switzerland or the brands’ own stores). Nevertheless, some of the sales are the duty-free shopping in Switzerland which are a substantial part of the sales and some are direct shipments (DTC) from brands to end-customers.

● 2023 was a record year which concluded a three-year cycle after the COVID-19 lockdowns and the most underperforming state of the economy in 2020, where sales volumes hit a new low since the 1940s. Omega had a historical record for their first semester in 2023, which unfortunately won’t reach this year. Even though the exports would dip by -10% this year, we would still be at the level of 2022 which was the previous record year.

● We are still at a +8.1% on a two-year stack (2024/2022) at the end of June which makes things look a lot better.

When I predicted a reduction in 5% of the Swiss watch exports for 2024 back in January in an interview, the journalist asked me twice before publishing if I was comfortable to predict such a negative evolution. I neither have a crystal ball nor do I pretend that my forecasts are always accurate, but I do listen to the suppliers and the markets — not the brands. Because no CEO will openly admit that he is struggling with his sales, even though he will tell you that all his competitors are. Another good intel source — and this is an exception to my rule — are the CEOs who don’t need to rush for the monthly or quarterly results. Thierry Stern, CEO and owner of Patek Philippe, said in an interview in February 2023 (…) that he would expect the current year (2023) to be tough, but that 2024 would really tough, because “the trees don’t grow into the skies”.

The positives

A few markets are still in a positive consumption mood and helping to keep at least some traction. The Americas are still showing a growth of +5.6% with South America even showing a tremendous momentum at +7.1%, of which is mainly due to Mexico that’s trending at +20.5% since beginning of this year. It’s in fact the only South American market showing up in the top 30 of the Swiss watch exports and is still bearing a huge potential not only for institutional brands, but also for niche players exhibiting each year at the Salón Internacional Alta Relojería México (SIAR) which became the place to be for South American watch aficionados twice a year.

But the main market — and it’s becoming increasingly the replacement for the lagging Greater Chinese market — is still the USA. They remain the number one market for Swiss watches and grew by a +6.5% in June and +3.6 year to date. The main players there are Rolex, who, with an over dominant position, hold an estimated market share of ~40% of Swiss luxury watches* followed by Omega and Breitling. It’s a challenging market to penetrate, but immensely rewarding once the brand awareness has been built up.

Japan is still on an extremely positive trend with a +13.2% in June and +7.7% since beginning of 2024. This is due mainly to the weak Japanese Yen that enables the flourishing tourism leading to their spending on luxury goods. In fact, the Japanese duty-free sales are capturing a part of the sales that are missing in Greater China. Hence I would be a lot more cautious than some brand CEOs when analyzing the downward trend of the Chinese luxury consumption.

South Korea and Singapore are two other Asian markets that are trending positively at +12.1% and +0.5% in the first semester of 2024.

On the high-end, watches with a retail price tag above CHF 40,000 are still growing very strongly with two-digit growth rates since beginning of the year. The strongest growth rate is at the peak of the price pyramid with watches selling at more than CHF 100,000 SRP, where you’ll find Richard Mille, Patek Philippe, Audemars Piguet and some independent brands such as F.P.Journe or H. Moser & Cie with some of their product collection.

But there’s an exception to the rule, especially with Tissot growing at its core range price level. But there is some need of analysis needed here, as a major part of that growth is due to massive store openings in Greater China and the sell-in of substantial quantities of inventory. On the other hand, the massive success of the MoonSwatch seems to flatten out, and I forecast the sales this year to be down ~-20% which would still be an impressive ca. 1.6m watches sold (2m in 2023).

The negatives

The growth of the Chinese market has never picked up since the state it left in 2019 pre-pandemic and unlike most of the industry, I wasn’t expecting it. The post-pandemic catch-up effect lasted a few months which were needed to replenish the stocks of the retailers in Greater China. The whole luxury industry has to live with the fact that even though the country still bears a phenomenal potential due to a fast-growing middle class and an expanding league of millionaires and billionaires, we should understand that the market is becoming more mature. Consumers are now educated when it comes to who’s who in the luxury world — even the Chinese host their own Watches and Wonders show in Shanghai. In turn, the brands themselves educate them to better understand the intrinsic values of their products. The Chinese Gen-Z are just as habitual as their western counterparts and also buy second-hand watches, which is a major change from the previous generations. And finally, we should not underestimate the government’s decision to damper the luxury consumption, especially among the younger demographics; the Chinese influencers have received strong “signals” that ostentatious luxury is no more well-perceived.

The volumes are declining strongly after two years of recovery, mainly due to the phenomenal success of the MoonSwatch and the PRX at Tissot. And to a lesser extent, the volume growth of Rolex, which however will stop this year. In June, only the volume of exported Swiss watches fell by a staggering -19.1% compared to last year. And since beginning of this year, we are down by almost -10% units which would bring it to ~15.2m watches, akin to the volumes in 2024 — this is half of what the Swiss watch industry was exporting in the year 2000. Needless to say, this has a major impact on the suppliers that are losing the volumes needed to work efficiently and to maintain the industrial capacities that any watch brand needs in Switzerland, big or small.

Winners and losers

Looking at the overall performance and comparing it with the figures just recently announced for its first fiscal year quarter, Richemont’s Specialty Watchmakers are at -13% (at constant exchange rates) compared with a -2% for the Swiss watch exports in the same period (April-June). The group is underperforming and hence losing market shares on a consolidated basis.

And so is Swatch Group at -10.7% in the first semester of 2024 (the group does not publish quarterly results) compared with the -3.3% of the Swiss watch exports on the same timeframe. In both cases, this doesn’t mean that all brands are losing market shares. As the detailed figures of the statistics show, Tissot is gaining market shares in its price segments and so is probably Vacheron Constantin at Richemont. And Richemont’s figures shown above do not include Cartier which probably performed rather good compared with the market’s average.

Even though LVMH has not yet published its results for the first semester 2024 (due to be published on July 25th) the first quarter was in line at a -2% (at constant fx rates), but that’s an average of the Watches & Jewelry Division and I forecast LVMH’s Watches Division to perform a lot worse than that. And the recent changes at the helm of LVMH’s watch brands are certainly linked to those negative performances.