Swatch Group to increase prices by 5-10% in Europe

Swiss watchmaker Swatch Group is going to increase the prices of its luxury watch by 5-10% in Europe, its CEO said on Wednesday, given the soaring Swiss franc against the euro triggered by a recent change in monetary policy by the Swiss National Bank (SNB).

"We will adjust prices in Europe for some brands between 5 to 7 percent, to 10 percent," said CEO Nick Hayek in an interview with Bloomberg. The price increases primarily concern the prestige watches Breguet, Blancpain and Omega as well as the high-end brand Longines, according to the head of the world's leading watchmaker. Hayek said he will be "more reluctant" to raise prices for Swatch and Tissot, which sell models at lower prices.

On Thursday, the SNB took the market by surprise by announcing that it was abandoning its rate floor, which was imposed three years ago to stop the Swiss franc from appreciating too much against the euro, causing a change in direction for the franc. The announcement has also led to a sharp correction on the Swiss Exchange, with investors particularly penalizing Swatch Group and Richemont, the worldwide number two in luxury. 

The industry is very sensitive to currency fluctuations, in that production costs for watchmakers are incurred in Switzerland, which manufactures the watches, while a large portion of the revenues are generated abroad, in foreign currencies. 

Hayek noted that the monetary effects, however, would be partially offset by the fact that operational retail costs and marketing expenses will be lower in Swiss francs. 

Other major watch brands are also planning to compensate, at least in part, for the rise of the Swiss franc through price increases. Meanwhile, brands are gathering this week in Geneva for the Salon International de la haute horlogerie (SIHH). The event showcases Richemont-owned brands, which are planning for price increases of 5-7%.