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Experts predict a strong year for watchmaking in 2014

Experts predict a strong year for watchmaking in 2014

Tuesday, 29 October 2013
By Quentin Simonet
Quentin Simonet

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3 min read

Estimates put growth in exports at between 5% and 10%, which would make for the fourth record year in a row.

2013 hasn’t said its last word, and already experts and analysts are pulling out their calculators to estimate next year’s pickings. And expectations are high, with forecasts of a sharp upturn in 2014. These predictions are confirmed by figures for September, which report the highest monthly increase since January this year. Compared with September 2012, sales to markets outside Switzerland gained 8.5% to reach CHF 1.9 billion. According to the Federation of the Swiss Watch Industry (FH), this upward trend has played out over the first nine months of the year. Between January and September, exports progressed by 1.9% on the same nine months of the previous year to reach a total CHF 15.65 billion.

Swiss watch exports (Source: Federation of the Swiss Watch Industry FH)
A new landmark

Except for a disastrous final quarter – which seems unlikely given the relative weakness of exports over the last three months of 2012 – the sector can look forward to another record year. In all probability, exports in 2013 will exceed last year’s total of CHF 21.43 billion.

Until recently, the macroeconomic indicators were red to amber.
Jean-Christophe Babin

What should be buoyant sales over the fourth quarter are expected to continue into the following months, suggests Jean-Christophe Babin, CEO of Bulgari (LVMH), in a recent interview: “Until recently, the macroeconomic indicators were red to amber. They’ve now switched to amber-green. We’re also seeing the end of the effects of destocking at retailers. I expect sales to take off quite quickly as of the beginning of next year.” According to the same Jean-Christophe Babin, “we can reasonably anticipate a 5% to 10% increase in Swiss exports [in 2014].”

All-round optimism

Analysts are taking an equally optimistic view. René Weber at Bank Vontobel currently predicts growth in the region of 6% to 8% in 2014, adding that he will update his forecast at the start of next year. He attributes this increase mainly to the revival of the Chinese market. After originally warning of another downturn in Greater China, he now anticipates a slight improvement in the region. Citi Bank is equally upbeat. Its analyst, Thomas Chauvet, believes exports will progress by 8% in 2014.

Over at Kepler Cheuvreux, Jon Cox recently upped his forecast. With the global economy looking up and the anticipated end to the Eurozone crisis, he expects exports to increase by 7% to 8%. Economists are in agreement that the world economy is improving, confirmed by the regular increase in purchasing managers’ indexes. China is taking a turn for the better and could even meet its growth target for 2013 of 7.5%. Better still, given this newly buoyant context Jon Cox thinks watchmaking could progress by an annual average of 8% over the next few years.

Major groups come out tops

First to benefit will be the major groups. Swatch and Richemont will continue to win market share and should see double-digit growth in local currencies. Overall, experts are predicting growth in Swiss watch exports to average 7% or even 8% next year, which would be the industry’s fourth record year in a row.

The BRIC countries of Brazil, Russia, India and China are still a long way from their full potential.
Jean-Christophe Babin

So is watchmaking one of a kind? “My impression is that over the coming years, luxury can continue to post annual average growth worldwide of between 5% and 15%, even if the base is significantly higher,” says Jean-Christophe Babin, whose next analysis can just as easily apply to watchmaking: “There’s a deep trend tied to increasing wealth and demographic change. Numerous markets, some of them new, will drive this growth. The BRIC countries of Brazil, Russia, India and China are still a long way from their full potential, not to mention bright prospects in countries such as Indonesia or Vietnam, and even in more mature markets such as South Korea.”

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