The head of Richemont, the owner of Cartier and Vacheron Constantin, said the luxury watch industry must reduce production after a downturn in demand for costly timepieces.
Chairman and founder Johann Rupert told shareholders at the Swiss luxury conglomerate’s annual general meeting that global demand for watches “has gone past the boom,” held back by subdued sales in mainland China and Hong Kong. “One should be cautious in just trying to pursue volume,” the South African billionaire said in Geneva on Wednesday.
The Richemont chairman, whose brands also include IWC, Jaeger-LeCoultre and Van Cleef & Arpels, applauded private competitors in the watch industry for showing restraint. The biggest closely held watchmakers in Switzerland include Rolex SA, Patek Philippe SA and Audemars Piguet Holding SA.“We have a close relationship with the private competitors and we know what they are doing and they are acting very responsibly by constraining production,” he said. Although Rupert controls Richemont through a family trust that has a majority of the voting shares, the stock is publicly traded and the company is required to provide detailed financial updates. By contrast, closely held watchmakers in Switzerland “don’t have shareholders to report to,” he added.After three years of gains at record value levels, Swiss watch exports have declined this year. Consumers turned cautious as pandemic-era savings ran dry following a period of high inflation and as a strong Swiss franc raised watch prices and crimped profits for producers. Bloomberg News reported last week that makers of watch components and some brands are using a Swiss government program that allows them to furlough employees and reduce production without permanent job cuts.
The South African billionaire, who founded the Swiss luxury conglomerate in 1988, has said high-end watchmakers should reduce the supply of timepieces to counter the softening market, as reported by Bloomberg. Richemont helms several horological heavyweights, such as Vacheron Constantin, IWC, Jaeger-LeCoultre, and Cartier, meaning that a change in production strategy could genuinely impact everyday collectors.
Rupert told shareholders at Richemont’s annual general meeting that the global demand for watches “has gone past the boom,” with sluggish sales in mainland China and Hong Kong contributing to a downright dull year. “One should be cautious in just trying to pursue volume,” he said in Geneva on Wednesday.
Rupert went on to praise rivals for curbing output. “We have a close relationship with the private competitors and we know what they are doing and they are acting very responsibly by constraining production,” he explained.
The Watch Market is Cooling Down
Watchmakers have long limited production and distribution to fuel consumer demand. Patek Philippe and Rolex have exerted ironclad control over their output in ways the group-owned brands cannot. Richemont is controlled through a family trust that has a majority of the voting shares, so the stock is publicly traded and the company must provide detailed financial updates. Other private Swiss watchmakers “don’t have shareholders to report to,” Rupert adds.
Swiss watch exports hit a record $31 billion in 2023, but sales have slowed significantly this year. The strong Swiss franc has pushed up watch prices and crimped profits for producers, Bloomberg notes.
Government Support for Watchmakers
As a result, the Swiss watch industry is turning to the government for financial aid. Watchmakers such as Girard-Perregaux and Ulysse Nardin are using a state program that allows them to furlough employees and reduce production without permanent job cuts, according to Bloomberg. (The program sees the Swiss state cover up to 80 percent of workers’ wages as companies eliminate shifts and work hours.) Some watch suppliers have also taken up government support after manufacturers cut orders.
The Silver Lining for Collectors
The good news is the market for pre-owned watches is in the collector’s favor. Prices of second-hand timepieces, such as Rolex sports watches, keep dropping, so you can score a real bargain. That’s quite the silver lining.
