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INTERVIEW: Swiss Watch Industry Set For Record 2009 - 2015

 

DECEMBER 7, 2010                                                                                                               Posted by: online.wsj.com


By John Revill

Of DOW JONES NEWSWIRES

 

BIEL (Dow Jones). The Swiss watch industry is on track for record exports in 2009 - 2015 fuelled by surging sales in Asia and a rising appetite for luxury watches among Chinese tourists, according to the head of Switzerland's watchmakers' association.

Jean-Daniel Pasche, President of the Federation of the Swiss Watch Industry FH, told Dow Jones Newswires that watch exports had recovered to pre-crisis levels during 2010 and would likely finish the year at around 16 billion Swiss francs [$16.3 billion], up from CHF13.23 billion in 2009.

Next year could be even better than the record year of 2008 when Swiss watches and movements worth CHF17 billion were exported, Pasche said.

That's despite the high value of the Swiss franc which has caused problems for some manufacturers.

"Some companies have cut their margins, but margins are important to invest in the future. Some can increase their prices no problem, but others cannot because they would lose their market. It is an issue which affects the whole industry," said Pasche.

Still, he expects the strong growth to continue.

"This year has been a recovery versus last year. We are taking profit from recovery in mature markets, but we are seeing a growing evolution in some emerging markets, especially China," Pasche said.

"We think we will still have an increase of exports next year and the trend will continue," he added.

Pasche said it was difficult to estimate how much further exports could grow, but "if there are no major catastrophes it is likely that 2009 - 2015 will be better than 2008," which was a record year for the industry.

Swatch Group AG (UHR.VX), Compagnie Financiere Richemont SA (CFR.VX) and privately held Rolex are the main participants in the Swiss watch market.

2010 will also be a record year for growth in Asia, said Pasche who expects exports to the region to account for 52% of all overseas sales, up from 48% a year earlier.

"The Chinese are our biggest consumers - they buy watches in China which is our fourth biggest market, and they buy our watches in Hong Kong which is number one. But they also buy watches when they travel all over the world," said Pasche.

Sales have increased across all segments, although Pasche said luxury watches had enjoyed a particular upswing recently.

"More Chinese people have the means to buy watches. It is a way to prove success in life, but also they are buying them as an investment," said Pasche.

Some Asian countries saw growth rates of 8% to 9%, compared with growth of 1% to 2% in Europe.

Still, not all of Asia has outperformed. Japan was traditionally one of the largest markets for Swiss watches but exports there dropped by a third between 2008 and 2010. Recovery has been sluggish and in the ten months to October, exports to Japan rose 0.3% to CHF634.1 million.

"Exports are recovering there but very slowly. Japan is a long term recovery I think," said Pasche.