Swiss Watch Export Growth Slows to Weakest Pace in Three Years

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Swiss Watch Export Growth Slows to Weakest Pace in Three Years
Credit: © Reuters.

(Bloomberg) -- Swiss watch export growth weakened to the slowest pace in three years as the market for lower-priced timepieces evaporated and the coronavirus outbreak threatens to pummel the industry.

Shipments rose 2.4% to 21.7 billion francs ($22.4 billion) in 2019, the Federation of the Swiss Watch Industry said Tuesday. Exports to Hong Kong dropped 11% as political protests led to store closures in the top export market.

Swiss watchmakers this year will be challenged to find markets to offset China, where consumption will likely slump because of the spread of the viral lung disease. Authorities in that country curbed travel for 40 million people during the Lunar New Year, the peak gifting period. Switzerland exported almost 50% more timepieces to China in December, ahead of an earlier-than-usual Chinese New Year that kicked off on Jan. 25.

The coronavirus could lead to a reduction of as much as 8% to earnings for luxury-goods companies this year, RBC analyst Piral Dadhania estimated. Such firms generate some 35% of revenue from Chinese consumers, he added. The SARS epidemic led to a 20% drop in international travel in 2003, according to RBC.

Shipments of Swiss watches by units fell to the lowest level since 1984, down 13% to 20.5 million as the industry focused on limiting production and shifting toward higher-priced models.

Lower-end timepieces have been struggling with competition from fashion labels and smartwatches. That’s bad news for Swatch Group (SIX: UHR ) AG (OTC: SWGAY ), which gets a good share of earnings from cheaper brands like its namesake and Tissot. The watchmaker is expected to report 2019 earnings as soon as this week.

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