Swiss watch exports fell 16 percent year-on-year in June 2016, logging the highest ever drop according to the Federation of the Swiss Watch Industry.
China and Hong Kong, two of the world’s largest markets for the luxury watches, lost the most since a financial crisis in China started in mid-2015. Hong Kong reported a steep downturn for the 17th consecutive month, while China showed some signs of recovery in June.
The performance in the United States was better than average but Europe also lost, especially Italy, Germany, France and the U.K. Persistent terror attacks in Europe are scaring away tourists, also from China.
Precious metal watches were the worst performers with more than a 30 percent decline. Steel or bimetal timepieces were less affected but still fell.
In terms of price distribution, the 200-500 francs ($202-505) category posted the steepest falls, while watches priced between 500 and 3,000 francs ($505-3,030) stayed more resilient in June and also in the last 12 months.
Clocks and watches as a product group were ranked 4th among Swiss exports and represented 7.7 percent share in Swiss global shipments in 2015. Despite big fall in watch shipments, overall Swiss exports grew in the last 12 months.
The sales downturn led to a more than 50 percent decline in Swatch Group AG’s first-half profit, the lowest in seven years. The group faces weak demand as fewer Chinese tourists that shop in Hong Kong and Europe.
The shares of Swatch fell 38 percent in the last 12 months. The largest watchmaker in the world has 20 brands including Breguet, Blancpain, Glashütte Original, Omega, and Longines.
Europe and Switzerland were challenging markets for Swatch Group since “Chinese and Russian tourism was practically non-existent as a result of delays in the issue of biometric visas to Chinese tourists and sanctions against Russia.”
The U.K. had a strong start for retail in July for Swatch, because the pound lost value against other world currencies, including the Chinese renminbi.
“Omega’s engagement in the Olympics in Rio de Janeiro will generate further positive stimulus,” said the company in its earnings report.
Swatch does not expect a recovery in Hong Kong soon. According to the earnings report, the third-party distributors in Hong Kong are not very confident, which will cause further delays in reorders.
In short: Hong Kong is in trouble, says Swatch Group’s CEO Nick Hayek.