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Watches that are an antidote to the crisis

Watches that are an antidote to the crisis

Monday, 09 March 2020
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Christophe Roulet
Editor-in-chief, HH Journal

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4 min read

The strong growth and healthy earnings projection from Watches of Switzerland, the world’s second-largest retailer, offer a ray of sunshine.

The advantage of public companies is that they must be sufficiently open about operations for shareholders to be able to gauge how well (or otherwise) business is doing. Watch industry observers have access to this first-hand information as a number of large groups within the sector are publicly listed. For example, extrapolating the numbers tells us that Swatch Group is representative of the industry as the world’s largest watchmaker with 18 brands covering the entire spectrum from entry-level to luxury and a solid manufacturing base. This transparency now extends to distribution following the floatation, in May last year on the London Stock Exchange, of Watches of Switzerland, the world’s second-biggest watch retailer with revenue of £773 million (€890 m / CHF 947 m) from its stores in the United Kingdom and the US.

Watches of Switzerland is standing by its projection for the year, coronavirus or no coronavirus.

In these troubled times, the company’s results are a closely scrutinised barometer for the profession as a whole. Granted, Watches of Switzerland doesn’t operate stores in South-East Asia where sales are at a standstill, but its UK/US base is very much the profile watch brands are looking for right now in their search for growth opportunities. For the nine months to end January 2020, the British retailer reported a like-for-like increase in sales of 8.9%, tailing off slightly to 6.8% in the third quarter due mainly to a Rolex price increase. More encouraging still, it is standing by its projection of comparable growth for the full year, coronavirus or no coronavirus. “Looking ahead to the final quarter of the current financial year, improved visibility of luxury watch supply leaves us confident that we are on track to meet guidance for the full year,” declared Watches of Switzerland CEO, Brian Duffy, as results were announced. “We continue to monitor the effects of the ongoing coronavirus outbreak on the wider market and global trade. However, as demand for luxury watch brands in the UK and US continues to exceed supply (…) we are well positioned to continue to deliver on our plans to leverage our leading position (in these two markets).”

"Strong and coherent brands"

Like other retailers, Watches of Switzerland has been impacted by the drop in Chinese tourism. The share of its sales to Chinese nationals for the first three quarters fell from 10% to 7.8%. However, this is no cause for alarm with local demand picking up the slack; in fact demand for Rolex, Patek Philippe and Audemars Piguet has been so strong the company is even facing supply constraints. In other words, watchmaking has its antidote to the crisis. A survey conducted in 2009, following a disastrous half-year during which Swiss watch exports plummeted 26% in the wake of the global subprime crisis, already revealed significant disparities. At that time, according to one Geneva retailer, demand in Switzerland focused on “strong and coherent brands. Ones that don’t change their design language or DNA to fit in with the ups and downs of share prices or the economy.” The watches that performed best were the Breitling 01 chronograph, powered by the brand’s first and unanimously praised in-house chrono movement; the Panerai Luminor 1950 which marked the debut of the P.9000 family of in-house calibres; the never-out-of-style Reverso by Jaeger-LeCoultre in its large version; the Omega Speedmaster which was celebrating the fortieth anniversary of the first Moon landing; the revamped Rolex Datejust II and classic Patek Philippes, led by the Nautilus.

Brands' most iconic watches remain their trump card.

Few would be surprised by this list of brands whose icons have sailed through the decades and which know how to keep the flame alive, introducing subtle changes that bring freshness to collections without altering their essence: “evolving without changing” as Chanel said of its J12. Think of the Portofino from IWC, the Luminor Marina by Panerai, Cartier’s Santos-Dumont or the Piaget Polo, to stay within the Richemont group. With little in the way of new launches so far this year, watches such as these, presented over past months at approachable price points, fly the flag for brands that are facing a tough first six months and whose (generally non-complicated) icons are still their trump card.

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