Swiss watch exports had their biggest decline in six years last month, led by a 39 percent slump in shipments to Hong Kong, the industry’s largest market.
Shipments declined 12 percent to 2 billion Swiss francs (US$2 billion), the Swiss customs office said in a statement yesterday. Adjusted for fewer working days, the drop was 7.6 percent. Exports to the US dropped 12 percent.
“2015 has been one to forget for the watchmakers,” said Jon Cox, an analyst at Kepler Cheuvreux in Zurich.
Hong Kong’s lead against the US is eroding seven years after becoming the world’s biggest marketplace for Swiss watches. The industry is pulling back in the island city, with TAG Heuer shuttering a store there in August. Richemont, the maker of Cartier jewelry and IWC timepieces, has said its sales declined last month on weak watch demand.
“Hong Kong’s share is likely going to remain somewhere above 10 percent in the medium-term after being over 20 percent a year ago,” Cox said. “It is never coming back to where it was.”
The month had a challenging year-earlier comparison as exports rose 5.2 percent in October last year, one of the biggest gains of that year. Watch shipments, which make up about one-10th of Switzerland’s total exports, have declined 3.2 percent in the first 10 months of the year.
“The data would suggest prudence about Swatch,” wrote Luca Solca, an analyst at Exane BNP Paribas in a note to investors. The watchmaker is to find it harder to fight inventory build-up due to the difficult wholesale watch market and a significant number of new models the watchmaker is introducing, Solca said.
Competition from Apple Inc’s smartwatch has also weighed on low-end brands of timepieces. Fossil Group Inc, a US watchmaker, saw its stock slump 37 percent on Friday last week after saying fourth-quarter sales might decline as much as 16 percent amid competition with wearable technology.
The 11 percent surge in the Swiss franc from a year ago has eroded the industry’s profit margins. Richemont said that it is cutting 85 positions at watch-dial maker Stern Cadrans, shifting some employees to other sites.
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