Richemont Chairman Johann Rupert believes it’s time for the watch industry to restore the laws of supply and demand.
Bloomberg reported that the South African billionaire, who founded the Swiss luxury conglomerate in 1988, said luxury watchmakers should cut their supply of watches to counter the softening market. Richemont heads several major watchmakers, including Vacheron Constantin, IWC, Jaeger-LeCoultre and Cartier, and any change in production strategy could have a real impact on everyday collectors.
Mr Rupert told shareholders at Richemont’s annual general meeting that global demand for watches was “past its boom days” and that weak sales in mainland China and Hong Kong had led to a lackluster year. “We should be cautious about chasing only sales volumes,” he said in Geneva on Wednesday.
Rupert also praised rivals for their efforts to curb production: “We work closely with our private sector competitors and we know what they are doing. They are acting very responsibly by curbing production,” he explained.
Watchmakers have long limited production and distribution to meet consumer demand. Patek Philippe and Rolex have tightly controlled their own production in a way that group-controlled brands cannot. Richemont is controlled through a family trust that holds a majority of the voting shares, so its shares are publicly traded and the company is required to report detailed financials. Other privately owned Swiss watchmakers “don’t have shareholders to report to,” Rupert adds.
Swiss watch exports were set to hit a record $31 billion in 2023, but sales have slowed significantly this year, Bloomberg noted, as the strong Swiss franc has pushed up watch prices, squeezing manufacturers’ profits.
As a result, the Swiss watch industry is seeking financial support from the government. Watchmakers such as Girard-Perregaux and Ulysse Nardin are taking advantage of a government program that allows them to furlough employees and reduce production without making permanent layoffs, according to Bloomberg. (Under the program, the Swiss government will cover up to 80% of workers’ wages when companies cut shifts or hours.) As watchmakers cut orders, some watch suppliers are also getting government assistance.
The good news is that the pre-owned watch market is favoring collectors. Prices for pre-owned Rolex sports watches continue to fall, making it possible to pick up some real bargains. This is a very encouraging sign.
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