First-half exports bode well

When Swatch Group, watchmaking’s biggest multinational, publishes its results, the industry generally sits up and takes note. For many observers, the fact the group has a finger in every market segment means its performance is a strong indication of how the sector is faring overall. It’s still in everyone’s memory that Swiss watch shipments fell by 10% in 2016 as brands bore the brunt of economic downturn, political uncertainty and general insecurity. Hence Swatch Group’s results for the first half-year from January to June 2017 came as something of a surprise. The group reported a 1.2% rise in net sales to CHF 3,759 million at constant exchange rates. Operating result was similarly buoyant, climbing 5.1% to CHF 371 million; operating margin grew to 10%. In this light, the group has high expectations for the second half of the year and anticipates “very positive growth in local currency.”

After these long, dry months that left contractors (the companies that supply movement parts, for example) especially parched, it seems the sun is ready to come out at last. Figures published by the Federation of the Swiss Watch Industry (FH) confirm the tendency given by Swatch Group. Watch exports for the first six months of the year amounted to CHF 9.5 billion, a figure in line with the same period one year previously. “Although Swiss watch industry exports are not equally dynamic everywhere,” the FH notes, “their overall trend has stabilized, spelling the end of the downturn. This stabilization had not been expected before the end of the year. The target for the whole of 2017 has therefore already been achieved after six months, thanks to a good second quarter (+3.0%).”

"Prudent optimism"

The breakdown of results per region shows that after the historic nosedive that left the market inundated with inventory, Hong Kong – the main destination for Swiss watch exports – is out of the woods and climbed 0.5% over the six-month period in value. China (+21.7%) confirmed its strong performance month after month; the United Kingdom also showed a steep increase (+16.3%), boosted by the fall in sterling. At the other end of the spectrum, the United States (-5.9%) and Japan (-9.8%) continued to struggle, as did Germany (-6.1%) and France (-4.2%). In this context, the FH’s forecast for 2017 remains one of “prudent optimism.”

Despite such caution, the industry’s other listed companies are also sending out positive signals. First Hermès. After falling 6% in the first quarter, sales for the French firm’s watch division bounced back in the second quarter at +4%, meaning at the very least sales stabilized and even improved slightly with a reported upturn of 0.5% over six months. Then LVMH, where positive signals have turned into healthy growth. Its watches and jewellery business group ended the first half of the year with a 14% increase in revenue to €1.8 billion while profit from recurring operations came to €234 million (+14%). In a nutshell, Bulgari and TAG Heuer are powering ahead, Hublot continues to grow, and Zenith is waiting to feel the effects of Jean-Claude Biver’s magic touch. Granted, not all watchmakers have enjoyed such a resounding first-half, but they have at least pulled themselves out of the quagmire that had been holding them back for the last year and a half.