The coronavirus crisis is expected to obliterate at least a decade of growth for the Swiss watch industry, with analysts predicting a 25 percent decline in 2020 exports stemming from months of retail store closures around the world.
“We’re under no illusion that business will be gangbusters,” said Ruediger Albers, president of the watch retailer Wempe USA, whose Fifth Avenue store in Manhattan has been closed since mid-March.
René Weber, a Zurich-based luxury goods analyst with the Swiss private bank Vontobel, said the estimated 25 percent export decline, which he forecast in a report published April 1, “looks currently to be on the optimistic side.”
“The major groups — Swatch Group, Richemont, LVMH — and the top-end brands like Rolex, Patek Philippe and Audemars Piguet have very solid financing,” Mr. Weber wrote in an email. “The larger players will become even more important, whereas the smaller brands will have more problems — not just financing, but also distribution.”
The troubles extend to the retail sector, where multibrand stores are being squeezed between powerful brands eager to eliminate wholesalers and, on the other hand, consumers anxious about personal finances.
“Even before the pandemic, independent watch and jewelry retailers in Europe and North America, many of which are small, family-owned stores, were already struggling — in part because of high-end watch brands moving to vertical integration and, more recently, the growth of e-commerce and the fast development of the smartwatch business,” Thierry Huron, founder of The Mercury Project, a Swiss watch and jewelry consulting firm, wrote in an email.
“Covid-19 might force some of them out of business,” Mr. Huron added.
Following is an update on the pandemic’s widespread impact.
After nearly two months of shutdown, most Swiss watchmakers restarted production in late April and early May, though many are working at reduced capacity.
Production resumed at Patek Philippe’s Geneva facilities on April 27, and is progressively returning to normal, according to a company statement. The Rolex factory, which reopened May 4, is back to almost 100 percent, said a spokeswoman. And Audemars Piguet restarted on May 11, but remains at about 80 percent of capacity.
“We hope to get back to 100 right after vacation, by the end of August,” said Audemars Piguet’s chief executive, François-Henry Bennahmias.
Omega, another of the industry’s best-selling brands, never officially closed its factory, and has gradually increased production in stages, said a spokeswoman.
The pause in manufacturing has caused delays all along the pipeline.
“My biggest problem is not getting my stock in,” said Alon Ben Joseph, managing director of Ace & Dik Jewelers in Amsterdam. “Tudor closed down and I missed two monthly shipments.”
Retailers are reopening stores while trying to incorporate new practices and strategies designed to make consumers feel safe.
“We’ve got these Perspex guards to prevent airflow and potential infection,” said Brian Duffy, chief executive of the Watches of Switzerland Group, which is based in Leicester, England, and owns numerous multibrand and monobrand stores in the United States and Britain. “Because you can never stay six feet apart when you’re presenting a watch.”
In April, Swiss watch exports plummeted 81.3 percent over all by value compared with the previous April, to reach 328.8 million Swiss francs, or almost $342 million, according to the Federation of the Swiss Watch Industry. (Exports are a lagging indicator because they do not track sell-through at the retail level, but they are considered an important gauge of the industry’s health.)
From January to April, exports were down 26.3 percent by value compared with the same period last year.
In the world’s top two markets for Swiss watches in 2019, Hong Kong and the United States, April exports collapsed by 83.2 percent and 86.4 percent, respectively.
By contrast, a relatively modest 16.1 percent year-on-year decline in China — which absorbed a third of Switzerland’s watch exports in April — pointed to a recovery.
“We expect strong growth in China in the coming months as the Chinese will travel much less,” Mr. Weber wrote in an email. (In the past, Chinese travelers spent lavishly during foreign travel, avoiding their country’s significant import duties on domestic purchases.)
He said a quick recovery in Hong Kong was unlikely, as unrest over Beijing’s effort to impose national security legislation has continued and quarantine restrictions have effectively eliminated tourism from mainland China.
Similarly, Europe’s lack of tourism likely will produce a drop of 40 percent to 50 percent in its share of 2020 Swiss watch exports. And the United States, Mr. Weber predicted, would experience a 20 percent to 30 percent decline in exports by year’s end.
To blame the coronavirus for all of the Swiss watch industry’s woes, however, is to miss a larger point embedded in the federation’s latest figures.
“Overlooked in all of this data is what’s happening with unit exports,” said Joe Thompson, executive editor of the watch site Hodinkee.
“Less than 10 years ago, in 2011, the Swiss were exporting 29.8 million units and dropping steadily,” he said. “In 2019, they were at 20.6 million. Last month, they were down to 338,000.”
Mr. Thompson said the erosion mostly reflected a sharp decline in less expensive quartz-powered watches, primarily because of strong competition from smartwatches.
“I only point it out as another measure of how bad things are,” he said.
Analysts are looking at Compagnie Financière Richemont — the owner of Cartier as well as eight specialty watchmakers, including IWC, Jaeger-LeCoultre and Panerai — as an indicator of how the global luxury trade will weather the storm.
In its 2020 annual report for the fiscal year ending March 31, which was released on May 15, the company said the coronavirus was responsible for about 800 million euros, or $890 million, in lost sales, as well as an 18 percent decline in global sales in its fourth quarter.
Sales among the group’s specialist watchmakers declined 4 percent for the year, attributed to higher gold prices, a stronger Swiss franc and, of course, a sharp contraction as a result of the coronavirus in the Asia-Pacific region, the group’s single biggest market.
Rumors about the Baselworld fair continue to swirl.
The 103-year-old show — the oldest and largest global watch fair, owned by MCH Group, the organizer of about 90 other exhibitions including the Art Basel shows — first “postponed” its 2020 edition. Then it canceled the January 2021 replacement after a group of exhibitors, led by Rolex and Patek Philippe, announced they were leaving to form a rival event in Geneva next April.
Now, MCH said it would refocus the show on a wider section of the watch and jewelry industry, a change that would include a new name and, potentially, a new location.
“Now is the right moment to reconsider the brand,” said Michel Loris-Melikoff, Baselworld’s managing director since July 2018. The comment echoes remarks he made in 2019.
Mr. Loris-Melikoff said he would present a business plan for the 2021 event to the show’s board this month, including proposals to highlight independently owned watch brands, exhibitors representing both pre-owned watches and smartwatches, and gem and jewelry businesses committed to sustainability.
In response to reports that the show would move to Lausanne, Switzerland, in 2021, Mr. Loris-Melikoff said that a concept must be approved before a destination, and suggested that the event could remain in Basel or be held in an MCH-owned venue in Zurich. He said MCH would ensure that the timing synced with the Watches & Wonders fair in Geneva, set for next April. (Dates have not been announced.)
Also, the organizers of Geneva Watch Days, a multibrand event for retailers and media originally planned for late April, have confirmed that it will take place Aug. 26 to 29 in locations throughout the city center.
It has a host of participating brands, including Bulgari, Breitling, De Bethune, Gerald Genta, Girard-Perregaux, H. Moser & Cie, MB&F, Ulysse Nardin, and Urwerk.
There have been a lot of rumors about bankruptcies in the Swiss watch industry, but if there will be a wave, it has yet to materialize.
Unrelated to the coronavirus, RJ Watches, known for its pop culture-themed watches, announced Feb. 27 that it had filed for bankruptcy in Switzerland because its majority shareholder, Alliance Investment Group, had stopped investing in the company.
Jean-Daniel Pasche, president of the Federation of the Swiss Watch Industry, said on May 29 that he had not heard of any coronavirus-related bankruptcies, but that he “cannot exclude that some companies cannot survive this crisis.”
Most industry watchers agree that small companies are most vulnerable, but others counter that independently owned firms are more nimble than their large competitors, and that they can adapt to the rapid changes brought on by the pandemic.
“Any plan we made two months ago or a month ago doesn’t apply anymore, because the situation changes every week,” said Maximilian Büsser, founder and creative director of the Geneva-based independent brand MB&F. “I was talking with my sales director about our three-year plan. ‘In 2023, do you think we’ll sell that piece?’ And we were just laughing.
“We’ve planned for the same revenue in 2021 as 2020,” Mr. Büsser added. “Maybe we’ll have a great surprise, but I refuse to pilot my company on hope. I’ve prepared for the worst-case scenario.”