The FHS, the Swiss Watch Federation, just released its export statistics for the month of February 2020, and, as you might expect, these are down. The value of exports contracted by 9.2% to CHF 1.6 billion. But, this does not even reflect the severe and jittery situation on the market provoked by the Coronavirus Pandemic. If exports were down 51% to China and down 42% to Hong Kong, shipments to the US were still up 17.8%, as the epidemic had not yet hit that country. The same situation is visible in Germany (+7.3%), France (+12.6%) and Italy (+5.0%). The Coronavirus Pandemic, as of March 2020, has now spread globally and this is just the beginning of the downturn for Swiss watch exports…
Naturally, Coronavirus is first and foremost a health problem, but second an economic one. The luxury industry, including the Swiss watch industry, is expected to be amongst the hardest-hit sectors. Consumer consumption has collapsed as many countries are now under complete lockdown. Billions of luxury sales will be wiped off as travel restrictions put the brakes on the spending of Chinese. Without mentioning that the mood is simply not for luxury spending.
Declines were seen in all sectors. They were extremely marked in the CHF 200-500 (export price) range, which fell by more than half. Below CHF 200 and between CHF 500 and 3,000, export turnover declined by 18%. The damage was limited for watches priced over CHF 3,000, which remained at almost the same level as last year.
In Switzerland, the two major watch shows – Watches & Wonders Geneva and Baselworld – joined the list of cancelled or postponed events. At MONOCHROME, we receive daily news of product launches and smaller-scale events that have been postponed. Most of the manufactures are now shut down. Majors brands like Rolex, Patek Philippe, Audemars Piguet, Hublot or TAG Heuer have closed production sites for several days at least. The entire supply chain is disrupted with suppliers closed too (Sellita, for instance). The Swiss government locked down the nation and short-time working (RHT – Réduction d’Horaires de Travail) is one of the Swiss remedies to cope with the situation. To preserve skills and jobs, Swiss companies can reduce the working time of staff (up to 80%) and the non-working time can be covered by unemployment insurance. Most brands and companies are basically in crisis mode, activating contingency procedures to protect their staff while trying to ensure business continuity, cash saving and planning for an eventual recovery.
The pandemic will inevitably take a heavy toll and wreak havoc on the watch industry. The coronavirus crash will most likely be worse than the 2008 subprime crisis. Stocks of luxury giants LVMH, Swatch Group or Richemont have plunged 35% to 45% versus recent highs.
To end this on a somewhat more positive note, the situation is improving in China. Chinese shoppers are now emerging from quarantine and are slowly returning to malls and stores. As reported by Bloomberg, some are even hoping for a luxury rebound driven by “revenge spending”.
More details and full report at fhs.swiss.