The top three private watch brands – Rolex, Audemars Piguet and Patek Philippe – will be the quickest to recover from the negative effects of Covid-19, according to a report by Bank of America Securities. Bloomberg
The top three private watch brands – Rolex, Audemars Piguet and Patek Philippe – will be the quickest to recover from the negative effects of Covid-19, according to a report by Bank of America Securities. Bloomberg
The top three private watch brands – Rolex, Audemars Piguet and Patek Philippe – will be the quickest to recover from the negative effects of Covid-19, according to a report by Bank of America Securities. Bloomberg
The top three private watch brands – Rolex, Audemars Piguet and Patek Philippe – will be the quickest to recover from the negative effects of Covid-19, according to a report by Bank of America Securiti

Swiss watch makers face increased competition from smart devices


Deepthi Nair
  • English
  • Arabic

The value of Swiss watch exports declined by 10 per cent in the third quarter of 2020, according to Bank of America Securities.

The headline figure masked a bigger decline in sales volumes, which fell 32 per cent, as average selling prices continue to rise - up 20 per cent in Asia, the Middle East and the Americas.

“Our cautious mid-term outlook for the industry is shaped by our view that the industry will see little volume growth, increased competition from smart watches and is beginning to be disrupted by online watch marketplaces, which removes an element of pricing power and creates a more liquid second-hand market," the BofA Securities note added. Online watch marketplaces, even for second-hand pieces, compete for the same customer base as traditional retailers, it said.

Demand for expensive watches has bounced back in some markets as affluent consumers emerge from their homes and spend some of the money they saved during lockdown.

This so-called “revenge spending” phenomenon has expanded from China to the US and Europe, as wealthy individuals divert money they would have splurged on overseas vacations and restaurant dining to high-end purchases.

Mainland China was the one bright spot globally, with Swiss watch exports growing by 67 per cent in the third quarter. Feedback from watch retailers in Asia suggest that the repatriation of spending – more luxury goods bought in domestic markets as opposed to during foreign holidays – is the key driver for demand, the report added.

The laggards in the sector continue to face a more challenging mid-term outlook, with the return to pre-Covid-19 levels of revenue likely taking several years

Swiss watch exports growth to the US was flat during the third quarter. Lack of tourism has affected sales in Europe, with exports down 20 per cent in the same timeframe.

BofA Securities said the top three private brands – Rolex, Audemars Piguet and Patek Philippe – will be the quickest to recover from the negative effects of Covid-19. Authorised dealers are now more selective about which brands they are restocking, it added.

These three brands enjoy robust demand for key products, with long waiting lists, “which should give them greater resilience over the coming months”. New product launches from these brands are also expected to re-energise demand.

“The laggards in the sector continue to face a more challenging mid-term outlook, with the return to pre-Covid-19 levels of revenue likely taking several years,” the BofA Securities report added.

Brands that are not expected to perform as well include Richemont and Swatch, whose shares look relatively overvalued as a result. “They trade at peak multiples we believe are unjustified by the lower future earnings growth potential,” the report cited.

LVMH Watches & Jewellery reported a drop in sales of 14 per cent, with a similar performance across both watches and jewellery during the quarter.

Meanwhile, French luxury group Kering has decided to reduce manufacturing capacity within its watch brands and cut its workforce by 25 per cent. The company attributed the decision to the contraction in sales relating to the pandemic and the watch sector’s weak recovery.

“This seems to suggest that the broader industry outside of the highly desired brands remains much more challenging,” the report added.

Demand for smart watches, meanwhile, continues to grow - up 20 per cent year-on-year in the first six months of 2020, according to Hong Kong-based research company Counterpoint. Apple currently dominates the market with a 51.4 per cent market share, senior analyst Sujeong Lim said in August.

"In terms of shipment volumes, Apple Watch grew 22 per cent globally, with Europe and North America being the fastest growing markets in the first half of 2020.”

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Analysis

Maros Sefcovic is juggling multiple international trade agreement files, but his message was clear when he spoke to The National on Wednesday.

The EU-UAE bilateral trade deal will be finalised soon, he said. It is in everyone’s interests to do so. Both sides want to move quickly and are in alignment. He said the UAE is a very important partner for the EU. It’s full speed ahead - and with some lofty ambitions - on the road to a free trade agreement. 

We also talked about US-EU tariffs. He answered that both sides need to talk more and more often, but he is prepared to defend Europe's position and said diplomacy should be a guiding principle through the current moment. 

 

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Key figures in the life of the fort

Sheikh Dhiyab bin Isa (ruled 1761-1793) Built Qasr Al Hosn as a watchtower to guard over the only freshwater well on Abu Dhabi island.

Sheikh Shakhbut bin Dhiyab (ruled 1793-1816) Expanded the tower into a small fort and transferred his ruling place of residence from Liwa Oasis to the fort on the island.

Sheikh Tahnoon bin Shakhbut (ruled 1818-1833) Expanded Qasr Al Hosn further as Abu Dhabi grew from a small village of palm huts to a town of more than 5,000 inhabitants.

Sheikh Khalifa bin Shakhbut (ruled 1833-1845) Repaired and fortified the fort.

Sheikh Saeed bin Tahnoon (ruled 1845-1855) Turned Qasr Al Hosn into a strong two-storied structure.

Sheikh Zayed bin Khalifa (ruled 1855-1909) Expanded Qasr Al Hosn further to reflect the emirate's increasing prominence.

Sheikh Shakhbut bin Sultan (ruled 1928-1966) Renovated and enlarged Qasr Al Hosn, adding a decorative arch and two new villas.

Sheikh Zayed bin Sultan (ruled 1966-2004) Moved the royal residence to Al Manhal palace and kept his diwan at Qasr Al Hosn.

Sources: Jayanti Maitra, www.adach.ae