Swiss watchmakers see Asia slowing

The Swiss watch industry, world leader in the production of luxury timepieces, is unlikely to continue enjoying the phenomenal growth it has witnessed over the past couple of years, say analysts and watchmakers, cited by Polished Prices. Demand will probably slow from China and Hong Kong, which now account for more than a quarter of all watch exports from the Alpine country, MarketWatch reported.
Some say it already has, the report said.
“For the past few months, it seems [watch] sales in general are going down,” said Masaki Saito, executive director at Geneva-based watch maker Montres Ludovic Ballouard Sàrl, which crafts about 50 watches per year costing around 50,000 Swiss francs [$55,173] per watch. About 30 percent of its products go to Asia. ”I talk with other independent watchmakers, and they also said they are calling sales points and they just don’t need the pieces.”
Exports of Swiss watches, which include well-known brands like Omega, Rolex and Cartier, jumped 19.2% to a record CHF19.3 billion in 2011, according to the Federation of the Swiss Watch Industry. The rise followed a 22% increase in 2010, representing a sharp recovery after a post-credit-crunch plunge. Booming Asian, and particularly Chinese, demand for all things luxurious powered the increase, thanks to the newly created millionaires and billionaires of the world’s second-largest economy, said the MarketWatch report.
But Chinese economic growth, which reportedly has topped double digits for several decades, is slipping, while income inequality — and Internet outrage featuring the overindulged rich — is on the rise. The latest figures show fourth-quarter year-on-year growth of 8.9%, the weakest in 2 ½ years, it said.
While there is little evidence that watch sales have so far been affected by a possible backlash against the wealthy, Beijing’s move last year to ban outdoor advertisements that promote lavish lifestyles can’t be helpful to an industry that relies on image as much as artistry, said the report.
According to MarketWatch, there already is some evidence growth may be slowing for watches. “We saw mixed sales results at the Hong Kong-listed watch and jewelry retailers over Chinese New Year,” said Mariana Kou, research associate at Hong Kong-based CLSA, an Asia-focused broker, in an email interview with MarketWatch. “We believe that luxury-goods-industry growth rates will halve this year, with growth in China slowing from 50% in 2011 to between 20% and  25% in 2012.”
To a certain extent, the market has already priced in the bad news. Shares in Swatch Group AG, Switzerland’s largest watchmaker, and rival Richemont SA are little changed year-on-year, despite both companies’ posting glowing earnings updates. Richemont, owner of the Cartier brand, said in January that third-quarter revenue jumped 24%, while Swatch earlier this month posted an 18% jump in 2011 profit as Chinese buyers gobbled up more Omega and Breguet timepieces, the report said.