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Another record year for Swiss watches
Economy

Another record year for Swiss watches

Wednesday, 20 February 2008
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Christophe Roulet
Editor-in-chief, HH Journal

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That the profession should be plagued by bottlenecks in production is no surprise, as Swiss watch exports grew 16.2% in 2007 to almost CHF 16 billion, a first in 18 years. Once again prestige watches have performed exceptionally well.

The figures have yet to be confirmed but they are no less telling. With export sales verging on CHF 16 billion – 15.96 billion to be precise – 2007 has proved to be another record year for Swiss watches, which gained 16.2% on the previous twelve months. Sales haven’t soared like this in 18 years. The performance is all the more impressive given that 2004, 2005 and 2006 were already buoyant years for the sector, driven by renewed interest in mechanical watches, with average annual growth of around 10%. Even so, no superlative is too strong to describe 2007, to the point that some watchmakers are reining in their ambitions in the hope of partially absorbing the bottlenecks that have formed across the production chain.

A higher average price

Once again sales were driven by watches with an export price of more than CHF 3,000. For the year as a whole versus 2006, they gained 16.7% in volume to reach 1,022 million units, and 25.3% in value at CHF 7.83 billion. This compares with an increase of 4.2% and 16.2% respectively for all price segments taken together. In other words, while this category represents just 3.9% of the total number of watches sold at export, it accounted for 52.9% of their value. Proportionately, this is a quarter more than last year.

Another noteworthy point to emerge from these figures is that average price has continued to rise across every sector compared with 2006. This is most obvious among watches with an export price of CHF 3,000 or more: their average price has climbed 7.4% to CHF 7,662. For mechanical watches overall, the average price of exports in 2007 grew 6.3% to CHF 2,358. The increased price of raw materials goes some way towards explaining this. In contrast, the ratio of quartz watches to mechanical watches remained relatively stable between 2006 and 2007, at 14.7% in volume terms and 16.2% in value terms (for watches at more than CHF 3,000).

Hong Kong takes pole position

Again for watches with an export price of more than CHF 3,000, the sharpest increases among the ten main markets were recorded in the United Arab Emirates (+48.1% in value at CHF 217.9 million) and Hong Kong (+42.2% at CHF 1.453 billion), which leads the field ahead of the United States which grew by a more modest 6.7% (CHF 1.1 billion) and even fell in volume terms (-7.8%). Japan, which held onto third place, is the only country in this segment to record a downturn in exports, both in volume (-11.3%) and value (-2.4% to CHF 524.3 million). Italy ranks fourth (+16.2% at CHF 480.3 million) followed by Singapore (+35.9% at CHF 473.8 million), France (+35.7% at CHF 421.9 million), the United Kingdom (+26.3% at CHF 368.9 millions) and Germany (+7.6% at CHF 351.4 million).

Why go into detail? Suffice to say that any export sector would be happy to perform as well as Swiss watches have in 2007. A particular high point is that exports grew in both volume and value terms. True, companies are obliged to offset production costs and yes, for several years now they have been intent on proposing increasingly prestigious products, leading to substantially higher retail prices overall: the fact remains that the Swiss watch industry can no longer be accused of wanting to do more with less.

The question now is whether the sky’s the limit for Swiss watches. With the fall in the stock exchange, listed groups such as Swatch and Richemont, whose share prices have lost some 15% over six months, appear to be in less of a strong position than at the beginning of 2006. Furthermore, recession in the United States would inevitably have an adverse effect on economic growth worldwide, and therefore spending. Some welcome breathing space, some might say…

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