Breitling AG Chief Executive Officer Georges Kern said he is “fairly confident” the luxury industry has hit bottom as a China-led economic slowdown hits luxury retailers around the world.
“The problem for the Swiss watch industry, and for a lot of brands, is that part of it is dependent on the Chinese market,” he said in an interview on Bloomberg TV on Wednesday. “You need four or five engines on a plane. If one engine doesn’t work, you just hope the other four work.”
Swiss watchmakers warned last week about the outlook for an industry struggling with a decline in once-rich shoppers in China, the world’s second-largest market after the United States and a linchpin of the global luxury market, where Breitling’s sales there account for 6 percent, Mr. Kahn said.
As interest rates soar and geopolitical conflicts escalate, luxury watch buyers are cutting back on their spending, causing watch giants such as Omega-owner Swatch Group and Richemont, whose brands include Vacheron Constantin and IWC, to see sales in China plummet.
Khan cited one bright spot: India, where a strengthened luxury infrastructure, with expanded distribution and new shopping malls opening, is making it easier for people who previously shopped abroad to shop locally. Breitling plans to open two or three more boutiques in India but did not say when.
“The market is there and the wealth is there,” he said. “A lot of luxury brands, including us, are putting a lot of effort into that market.”
Earlier this month, industry group the Federation of the Swiss Watch Industry also called on the Swiss National Bank to take measures to ease the strong Swiss franc, which is putting pressure on the industry.
Khan said the franc would “certainly” be hurt by rising production costs, but he didn’t think banks would have much influence.
“It’s a free market. This is how it is. We need to work on improving productivity, reducing costs,” he said. “We’re going to address it.”
By Karen Lee
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Breitling’s CEO’s bet
Georges Kern spoke to BoF about the current state of the Swiss watch industry, what’s next for the Breitling brand, and why brands that increase prices without upgrading their products will suffer.
