A mixed bag for 2014 results

For Swiss watch manufacturers, 2014 has been a case of “loves me, loves me not”. Some are unshakeably confident, such as Nick Hayek who remains adamant “there is no crisis for Swiss watchmaking.” Or Richard Mille who seems almost embarrassed by his brand’s remarkable performance this year. Others, meanwhile, are more downcast: Greubel Forsey recently made known that it was cutting a dozen jobs out of the 115 at its Manufacture. Nor is it alone: TAG Heuer has made 46 staff redundant and introduced short-time working at its plant in Chevenez, as has Cartier at its site in Villars-sur-Glâne.

A less certain, less prosperous world

Performances by the major listed companies set the tone. For the third quarter this year, LVMH reported a 2% rise in revenue for its Watch and Jewellery division (Zenith, TAG Heuer, Hublot, etc.). Meanwhile, Kering (Girard-Perregaux, Ulysse Nardin, etc.) has posted a 3.5% increase for the same period. Richemont (Cartier, Jaeger-LeCoultre, Montblanc, etc.) boasts a 2% increase for its first half-year from April to September. As for Hermès, the group gained almost 9% over the first three-quarters of the year, although its watch division has seen sales drop by the same amount over these nine months, and plummet by as much as 14.4% between July and September. For Swiss watchmaking, the heady years of double-digit growth are a thing of the past.

This slowdown, already observed in 2013, is echoed in share prices. Over one year to end November, Swatch shares dropped 20% while Richemont lost 1.4% At +3.3% and +2.2% respectively, LVMH and Kering just kept their head above water. Only Hermès did better, gaining 6.7%. The reasons for this cooling-off are well-known, from anti-corruption measures in China to demonstrations in Hong Kong; from crisis in Ukraine to the threat of recession in Russia. The Middle East, meanwhile, is sitting on a powder keg and Europe is in stagnation. All of which adds up to a less certain, less prosperous world with inevitable repercussions for the luxury industry, even if the most affluent populations continue to see their wealth grow. A report presented in October by Bain & Co makes itself clear. For 2014, the consultancy forecasts growth in personal luxury goods of just 2% to EUR 223 billion (CHF 268.25 billion). This includes EUR 35 billion (CHF 42.1 billion) sales of Fine Watches, the same as in 2013.

Wrap up for winter

Figures from the Federation of the Swiss Watch Industry, albeit less defeatist, still point in the same direction. After the 1.9% increase in exports to CHF 21.8 billion (EUR 18.1 billion) recorded last year, the industry witnessed a rise of 3.1% to CHF 18.4 billion (EUR 15.3 billion) over the first ten months of 2014. Extrapolating these figures for the full twelve months of the year gives exports in the region of CHF 22.5 billion (EUR 18.7 billion). A new record, although prospects of a winter chill will put celebrations on hold.