Swiss watch exports for April -0.8%, high end -3.1%
Swiss watch exports for April showed a decline of -0.8% y/y vs March 6.3% on 3 ppt
easier comps, which we estimate translates to -0.6% on constant FX. Wristwatches
specifically were -3.1% on 4ppt tougher comps. The figures were better than the
comments from Richemont at its FY results last week that wholesale purchases
slowed significantly in “anticipation of worldwide pricing adjustments in May” with
the company reporting sales in April -8% at constant FX with Hong Kong and Macau
driving the Asia-Pacific underperformance. By region:
• Hong Kong, the largest Swiss watch export market, declined -29.7% in April on flat
comps (March -13.8%), and Mainland China recorded growth of +48.7% on 13 ppt
easier comps (March -2.4%), albeit distorted by ‘temporary exports’ with underlying
growth said to be nearer 10% (equivalent to 2% of total SWE growth).
• Europe posted solid Swiss Watch Export data +8.0% y/y (+16.3% in March) on 4ppt
tougher comps driven by tourists with Global Blue data recording a +72% y/y
increase in tourist spending in Europe in April.
• US continued its positive trend with a +3.1% increase (+22.4% in March) with the
comp 14 ppt tougher.
• Japan was 5.7% (March -5.1%) with the comp 3 ppt tougher.
By price point, growth continued to be focused on the sub CHF 200 segment +13.4%,
mid priced CHF 200-500 category declined -7.5% y/y, premium CHF 500-3,000 -7.9%,
and luxury CHF 3,000+, most important for Richemont, -2.4% despite volumes
increasing +0.9% with precious metal watches, especially gold (-9%), weak.
We continue to prefer the hard luxury names, despite their outsized exposure to the
challenging environment in Hong Kong, because soft luxury goods are retailing at
significantly higher premiums than hard luxury goods which we believe already largely
factor in lower expectations. Swatch and Richemont currently trading on 13.8x and
19.8x cal 2016E PE respectively vs sector on 18.7x.