Swiss Luxury Watchmakers Face Profit Squeeze From Stronger Franc
(MENAFN- Swissinfo) The CEOs of mid-priced and entry-level brands including Oris, Doxa and Maurice Lacroix said margin gains won from price increases last year have all but disappeared as thedollar's value has dropped to about $0.88 from parity with the franc in 2022. The timing of the currency's surge couldn't be worse, because it's coming just as demand eases following an unprecedented boom.“At 0.88 it actually is a problem,” said Rolf Studer, co-chief executive officer of Oris, whose CHF4,400 ($4,979) Muppet-themed“ProPilotX Kermit” watch introduced in March has become a top seller.“That's a lot when theis your biggest market.”
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It's unclear whether Oris and its peers will get relief anytime soon. With the risk of inflation still present, the Swiss National Bank is still expected to maintain elevated interest rates – or possibly raise them further – leaving analysts forecasting that the franc will likely appreciate further in the coming months.
The vast majority of Swiss watches are sold in the US, Asia and Western Europe, making currency fluctuations a major factor in the industry's performance. For Stephane Waser, CEO of Maurice Lacroix, checking foreign-exchange markets each morning has now become“daily life”.
At the same time, demand has already ebbed from record levels seen during the pandemic, when consumers stuck at home flocked to Audemars Piguet and Patek Philippe models posted on Instagram, after an initial plunge when Covid first spread. In July, Swiss watch exports posted their first monthly decline in more than two years as shipments to China fell sharply and exports to theslowed.
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Further price hikesNow, even as demand declines, watchmakers may have to impose further price hikes to offset losses from the franc's strength.
“Thedollar is the big question,” said Jan Edöcs, the head of niche dive-watch brand Doxa, which saw a spike in annual sales to about 10,000 watches during the pandemic as enthusiasts rediscovered its models once worn by French explorer Jacques Cousteau.
Doxa raised prices in Europe last year to offset the euro's weakness against the franc, but resisted hikes in thein part to keep its entry-level model below $1,000. Edocs said if the dollar were to drop to 82 cents per franc, Doxa would have to raise prices.
“But then,” he said,“thehas a massive drop in sales.”
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