Swiss luxury watchmakers are seeking financial aid from the government to help them weather a drop in demand.
Girard-Perregaux and Ulysse Nardin became the first brands to acknowledge they were taking advantage of government programs to preserve jobs and avoid permanent cuts. Sowind Group, which owns the two manufacturers, has put about 50 of its 320 employees, or 15 percent, on so-called short-time work or furlough, said Chairman and Chief Executive Patrick Pruniot.
“For now the watch crisis is small and a bit decoupled from the economy,” Prunineau said in an interview last week at the Geneva Watch Days. “This year is a challenge,” he added.
This follows similar moves by watch suppliers who have opted to take advantage of government support to weather the industry slowdown after manufacturers cut orders.
Under the scheme, the Swiss government will pay up to 80 percent of workers’ salaries if companies cut shifts or hours to meet falling demand for their products, aiming to prevent permanent job cuts in manufacturing sectors such as watchmaking.
In canton Jura, home to many watch-parts makers, some 40 companies applied for short-time work compensation over the summer, Pierre-Alain Berret, president of the Jura Chamber of Commerce, told the NZZ newspaper last month, up from just five at the start of the year.
Swiss watchmakers are suffering a sharp drop in demand, especially in China, after an unprecedented boom in the post-pandemic era when consumers flocked to buy expensive timepieces. After three consecutive years of record exports, wholesale watch exports fell 2.4% in the first seven months of the year as consumers refrained from spending on expensive watches.
The decline in consumer demand has hit brands that make cheaper watches hardest, while top-selling brands such as Rolex and Patek Philippe have held up relatively well.
The slowdown has also hit Richemont, which owns Vacheron Constantin and IWC, as well as Omega’s parent company Swatch Group AG, both of which have seen sales in China plummet.
Sowind’s Prunio said China’s economy shows few signs of improvement and the industry may only see a partial recovery in 2025. He said Sowind’s sales will likely be flat or slightly down in 2024. That compares with growth of just under 10% last year and a near doubling of sales in 2022.
Sawwind was owned by Kering SA until a management buyout in 2022. The brand produces luxury watches, with rare Girard-Perregaux models sometimes costing as much as $500,000.
Brave Face
At the Geneva Watch Days, heads of major brands were putting on a brave face amid the current economic downturn.
Breitling AG CEO Georges Kern said some suppliers and watchmakers are making drastic moves in response to the economic slowdown.
“Some of our suppliers took six, seven, even eight weeks off,” he said. “It’s a talent to balance and manage growth when it’s up and when it’s down,” he said. Breitling expects sales to rise slightly this year, citing recent improvements in the United States, he added.
Jean-Christophe Babin, CEO of LVMH-owned jewelry brand Bvlgari, said he expects the crisis in China to continue for the next few months, but he said his company’s focus on the more stable women’s watch market and its unusual manufacturing of most of its cases, dials and movements in-house allow it to adjust production and weather the slowdown.
Rolf Studer, chief executive of Oris, an independent brand known for its diving watches, said he wanted to limit the drop in sales this year to single digits as a drop in demand is exacerbated by the continuing strength of the Swiss franc, squeezing margins and pushing up relative prices for already nervous consumers.
“If people don’t think the economy will be that good next year, then they’re not going to buy a mechanical watch,” Studer said.
Andy Hoffman
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