Oct 2, 2014
The end of the prosperous years has struck for Swiss watchmaking
Oct 2, 2014
The Swiss watchmaking industry, which for a long time seemed to have defied the crisis, is seeing its model for growth crack, with the announcement of the first temporary unemployment measures and job cuts to adapt to the new market reality.
After having beaten records year after year, the exports of Swiss watches, largely driven by Asia, nevertheless saw a clear deceleration last year, only progressing by 1.9%. At the same time, the measures in the fight against corruption in China, prohibiting extravagant presents, have hit watch manufacturers hard, especially in the luxury sector.
With only 55,000 employees (1.3% of the employment market in Switzerland), the watch industry is the country's third largest exporter, after pharmaceuticals and machinery, with 21.8 billion Swiss francs in exports in 2013 (18 billion euros).
On Tuesday, Tag Heuer, the key watchmaker brand from French luxury group LVMH, announced it has cut 46 jobs in Switzerland in line with returning to a focus on its core business.
The group, which employs 1,600 people, including approximately 800 in Switzerland, is abandoning its diversified products with the exception of glasses. It is also postponing its plans to penetrate the high-end, as opposed to luxury, watch market.
Added to this is the partial unemployment measure for 49 employees until the end of the year at its Chevenez site, near France, where a lot of the employees come from and where it inaugurated a brand new factory last fall dedicated to the watch movement manufacturing.
Tag Heuer explained this decision was due to the drop in volumes, after years of growth in the double digits.
This decision comes up a few days after confirmation by Cartier, the flagship label of the Swiss group Richemont, partial unemployment measures starting as of 1st November in its manufacturing at Villars-sur-Glâne.
Up until now, the watchmakers recruited prolifically to answer to the soaring demands of the Chinese consumers.
"The watchmaking industry has seen a slow year", pointed out Jon Cox, an analyst at Kepler Cheuvreux, in an email to the AFP. "As a result, there is probably too much stock", he added, noting that the manufacturers are finding themselves forced to adjust their production.
In Hong Kong, the largest export market for Swiss watches, the current protests are only making analysts even more worried about the recent development in watch exports.
In August, they dropped by 8.4%, diminishing for the fourth month in a row after having decreased by 5.6% in 2013.
In an interview on Bloomberg TV, Philippe Léopold-Metzger, CEO of Piaget (Richemont Group) expressed confidence regarding the prospects in Hong Kong.
"It is clear that the circumstances are a bit particular," he stated. "We have to make [do] with it", he continued, saying he is convinced that the brand will continue to attract the right customers.
In Mid-September, the Richemont Group noted a decline in its growth over the first five months of its 2014-15 non-calendar fiscal year in the face of the drop in sales in key markets in Asia.
The group emphasised that the sales of Cartier, its prestigious jewellery label, were affected by lower demands and a reduction in stock at retailers' in the Asia-Pacific region.
In the first semester, Swatch Group, the global leader in watchmaking also saw its profits drop by 11.5%, down for the first time since 2009.
At the end of July, LVMH also indicated that the sales in its Watches and Jewellery division, one of the most dynamic for a long time, had declined by 1% in the first semester.
In an interview with the Swiss magazine Bilan, Jean-Claude Biver, at the head of the group's watch brands since March, expressed his desire to refocus Tag Heuer on its mid-range models.
"The 4,000 franc Tag Heuer watches sell really well, which is not the case for those priced at 8,000 francs and more (6,500 euros)", he explained.
"Like mountain-climbers tackling Everest, we are taking a break to get some oxygen", asserted Jean-Claude Biver.
By Nathalie Olof-Ors
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