TheChek News Flow

Watches have stopped

Wrist rollers and Rolex flippers, your time is up

“Is that the sound of a luxe watch bubble popping?” we asked in January 2023. The answer, it transpires, was yes.

The Fédération de l’industrie Horlogère Suisse has released its export report for March 2024 and . . . hoo, boy. Swiss watch exports by value were down 16.1 per cent year-on-year, with readings firmly negative for all big markets at all price points.

© Jefferies

To be sure, March 2023’s growth was 14 per cent so tough to loop, and the latest month had three fewer days. February sales had been weak, down 3.8 per cent year on year, so there was already widespread acceptance that three years of near-continuous growth had exhausted this hype cycle.

It’s still an abysmal reading though, and nowhere is it more abysmal than in China, where Swiss watch imports have dropped 42 per cent by value year-on-year.

Swiss watch exports to China by value © JPMorgan

Again, there are caveats required. China was in lockdown in early 2022, so its 2023 year-on-year consumer spending comparisons are artificially high and its 2024 comparisons are artificially low. Chinese new year, which can be in January or February, adds another complication to the first-quarter data.

The more telling trend is longer term: Chinese imports for March were down 40 per cent versus 2021 and down 21 per cent versus 2019, when the timing of Chinese new year was more-or-less the same as in 2024.

And it’s not just a mainland property-market-implosion thing. On a three-year view, Hong Kong imports for March were off 18 per cent and Greater China imports were down 40 per cent.

Has tourism’s return moved Chinese sales offshore? It doesn’t look that way. Year-on-year falls elsewhere are less dramatic but no more promising, with the US down 6.5 per cent and Europe down 11 per cent on further deterioration in the key UK and French markets. Exports to Japan — where according to LVMH tourist spending has been booming — lost 3.5 per cent.

A lot of watch industry types have been talking for a while about a squeezed middle. Carefully managed supply means high-end demand won’t drop off a cliff, while at the lower end Swatch hasn’t yet run out of ways to sell Moonswatches. It’s the middle-market wristwear, the kind of brands people buy as graduation presents or to bribe their way up a Rolex dealer’s waitlist, that are in trouble.

The data says something slightly different. Middle market volumes, meaning a wholesale price of 500 SFr to 3000 chf, sunk 42 per cent in March. But volumes above and below that range were down in the high-teens too.

High-end (which mostly means Rolex and its small-volume peers, Patek Philippe, Audemars Piguet and Vacheron Constantin) accounts for about three-quarters of Swiss watch exports by value terms. March was the category’s second consecutive month-on-month decline. That hasn’t happened outside the pandemic since early 2017.

As we’ve written several times already, the luxury-tier downturn coincides with secondary market premiums disappearing. Here, for the sake of variety, is Jefferies’ version of the watch-flipper price tracker.

Dealers searching for bright spots might look longingly at bitcoin’s recent gains, given how newfound crypto wealth has previously helped support Nautilus and Submariner demand. The previous boom has left a glut of second-hand supply, however, so the only real bright spot in the data is a 31 per cent jump in exports to Saudi Arabia.

Saudi is a tiny market for watches in global terms, where monthly readings are all over the place due to a combination of low volumes and stratospheric average-selling-prices. And with Qatar and UAE imports both negative, it’s definitely not a regional trend. Still, it’s something.

For granular detail, Morgan Stanley has put together the full table.

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