Andrea Felsted is a Bloomberg Gadfly columnist covering the consumer and retail industries. She previously worked at the Financial Times.

Swiss watch makers' message to Santa this year: please try harder.

Exports of Swiss watches fell 5.6 percent in November. While the industry may have escaped the worst of its downturn, a full recovery has not yet arrived.

Not as Bad
The pace of decline in Swiss watch exports eased as some buying emerged for mid-range products
Source: Federation of the Swiss Watch Industry

The headline figures mask some diverging trends, as well as some signs of life, both by region and by product.

Diverging Trends
While watch exports to China and Hong Kong are improving, the U.S. remains stubbornly weak
Source: Federation of the Swiss Watch Industry

Monthly figures can be notoriously volatile, but the weak U.S. performance may reflect uncertainty around the presidential election, together with pressure on tourist spending as the dollar strengthened. Exports to the U.K. continue to be strong, indicating that some luxury consumers are still exploiting a currency arbitrage with the weaker pound.

However you measure it, the high end is getting hard hit. Exports of precious metal watches dropped 13.4 percent by volume, and those priced above 3,000 Swiss francs ($2,900) also saw declining sales.

Price Premium
More expensive Swiss watches have been performing worse than mid-market models
Source: Federation of the Swiss Watch Industry


In general it's the super-rich who are still propelling demand for luxury goods -- spending on Hermes handbags and Chanel jewelry -- while the middle class are more cautious. However, the watch market is more complicated.

China illustrates the issue. On the one hand, the government's corruption crackdown has hit gift-giving. At the same time, some demand may be coming from new consumers in second- and third-tier cities, who are more likely to target the middle market than the early big spenders whose enthusiasm for high-end Swiss watches has been partly satisfied. 

The trends in price and material are more helpful to Swatch Group AG. Though it has some top brands such as Harry Winston, it has a strong focus on the mid-range through its Omega, Longines and Rado brands. Its shares rose as much as 3.5 percent on Tuesday.

Swatch Out
Swatch is trading at a forward price earnings ratio discount to Richemont, which is cutting costs
Source: Bloomberg Intelligence

Shares in Compagnie Financiere Richemont SA were unchanged. That's because the bulk of sales are more focused on high-end brands than the middle of the market. Among these, Piaget, Vacheron Constantin, Baume & Mercier and Jaeger-LeCoultre were particularly weak in the first half of its financial year, the company said.

Richemont, however, has been more progressive in cutting costs, while Swatch has sought to preserve production capacity ready for an upturn. As Gadfly has argued, that is the right strategy given the downturn, and justifies its slight premium to Swatch on the basis of their forward price to earnings ratios. 

But if the current trends in price and material continue, there may be be some merit in Swatch's approach.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andrea Felsted in London at

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Jennifer Ryan at