Every month around the 22d of the month, the Federation of the Swiss Watch Industry (also known as the FH) releases the export data for the previous month. The export data serves as a proxy for sales for many analysts. For the month of January 2017, the FH reported another decline in exports. Here is what you need to know.
The FH reported that exports were down -6% for the month of January when compared to January 2016. This is on top of a -4% decrease in January 2016 from the previous January (2015). When comparing January 2017 to January 2015, the industry is down almost a combined -10% from 2 years ago in January. This news comes on the heels of an annual result showing the industry down almost 10% for the year 2016.
The graph above (excerpted from the FH report) shows a leveling off graph, but that doesn’t mean the declines have stopped, rather they have become consistent. The graph is a 12-month moving average, showing sales losses continue to be in the negative territory, with a 10% average decline over the previous 12 months becoming the norm.
By country, some countries showed signs of growth including China and United States. In 2016, these two countries accounted for ~17% of Swiss watch sales. However, the major markets of Hong Kong, Germany, and Japan continued to show moderate to significant declines in sales. In this previous article, I broke out the sales percentages by country. In 2016, Hong Kong accounted for 12% of sales, Japan 6.5%, and Germany 5.5% (or a cumulative ~24%)
Swatch Group (the largest Swiss watch producer) reported more optimistic sales results in the Annual Figures summary released at the beginning of February 2017. The report stated:
The months of November, December and January showed, particularly in Mainland China, very good growth in the Watches & Jewelry segment, with a substantial improvement in operating margin.
By Price Point
Overall, people are spending less per watch in almost every category. Because the total VOLUME of watches decreased less than the VALUE of watches, it indicates that in every price category, people are spending less on the watches they buy and are looking for value purchases. The exception to this is in the introductory luxury category of CHF 500-3,000, where companies like TAG Heuer have been performing extremely well.
The luxury category of CHF 3,000+ seemed to perform better than others, indicating that consumers still perceive Swiss watches as a luxury item and are not walking away from Swiss made watches as much as in the cheaper categories. In a previous article, I showed this graph that shows the average amount spent by consumers on each watch purchase in the CHF 3,000+ category. It shows that the trend is to spend less.
Of particular note is the CHF 0-200 category which only saw a -0.8% decrease in volume but a -10.5% drop in value. This indicates that prices of watches in this category have had to come down significantly to compete and sell about the same number of watches as a year ago.
Steel watches and gold/steel watches performed the best. This goes along with the general trend of younger generations wearing fewer precious metals as well as consumers being after value purchases. In other words, they are seeking the same watch but in less-expensive metal.
If you want to learn more about the current state of the industry, please check out some of the recommended articles.