2016 Swiss Replica Watch Industry Woes Continue

It is no secret that 2016 has been a tough year for the Swiss watch industry, with companies issuing profit warnings that unambiguously predict no immediate end in sight for the slump. Compagnie Financière Richemont SA announced a 14% sales decline (13% at constant rates) yesterday for the first five months of its fiscal year (May-August), with jewelry sales – a saviour in previous watch-sales slumps – retreating by 16%. Richemont says operating profit will fall by 45%. In July, the Swatch Group reported a 52% plunge in first-half profit. Richemont brands include Cartier , Montblanc, A. Lange & Söhne, Panerai and Jaeger-LeCoultre. Swatch Group brands include Breguet, Blancpain, Omega, Harry Winston, Glashütte and Tissot. From January to July this year, Swiss watch exports declined by 27% in Hong Kong, by 17% in France, and 10% in the U.S., a fairly mature market for luxury replica watches. In Canada and some Middle East markets, sales increased.

DRIVE_DE_ CARTIER copy

Several factors have contributed to the decline in luxury watch sales: the strong Swiss franc, China’s crackdown on luxury gift-giving, tumbling oil prices, currency turbulence in Russia, uncertainty associated with the U.S. election and terror attacks in France, where tourism has slumped. In all of Europe, sales have increased only in the UK, particularly following the Brexit vote, which weakened the pound and thus the price of luxury replica watches.

LVMH, with brands including replica TAG Heuer, Bulgari, Cartier and Hublot, fared less poorly than others, reporting a 4% growth in revenue for the first half of 2016 (a figure that also includes Bulgari jewelry sales), with flat profits. The company says it gained market share for all brands, particularly TAG Heuer, which launched the highly successful Connected smartwatch last year, for which it will double production capacity in the coming months.

As for coping strategies, price reductions are widely anticipated, something that has been a long time coming say aficionados: “pigs get fat, hogs get slaughtered,” was a recent comment on one watch blog. Companies are also likely to revise product development, boosting lower-priced categories and putting the brakes on new high-horology showpieces. Even Apple AAPL +0.11% has decided to discontinue the $1000+ 18k gold luxury Smartwatch from its product range, making the ceramic smartwatch the most expensive in the collection, starting at $124 (TAG Heuer’s Connected retails for $150). Strategies will become clearer following the Salon International de la Haute Horlogerie in January and the Baselworld fair in March, the industry’s two key trade shows.

“In mature markets as well as in markets that are in crises, the only way to bring growth back is through innovation and creativity,” says Jean-Claude Biver, CEO of TAG Heuer and Hublot. As for the strong Swiss franc, he comments, “The Swiss Franc has been an issue since 1974, when I started in this business. At that time one dollar was like four Swiss Francs, and we survived.” He adds: “Unless we don’t get rid of terrorism, Europe will remain an important attraction for foreign tourism. Europe will also recover from its political, economic and financial crises and we should maintain our projections for next year in Europe.”

graff-mgmr47wgdd_3quarter

Vertical integration is another saving grace. Companies that produce their own in-house movements, dials and cases have an edge over those who don’t, and independent companies that are family controlled – such as Longines, Patek Philippe and Graff – also claim an advantage. Nicolas Sestito, CEO of Graff Luxury Replica Watches (Graff, is primarily a diamond company that successfully ventured into watches in 2008), says, “Because we produce everything in-house, we can be very flexible in our production. We are a speedboat compared to the big companies, which are like cruise ships. We can turn around faster. It is also an advantage that we manage our own distribution.” Many brands, including those owned by Richemont, have had to buy back product from their retail partners in recent months.

Carol Besler covers watches for Watch Journal, Watch Time, Robb Report, Nuvo, Revolution and International Watch. For more of her stories see idoreplica.co.uk