Business News: Credit Suisse Says Swiss Watch Indicators Bearish For 2019 - HODINKEE

Slowing sales to retailers and consumers in Greater China, combined with rising inventories, are bound to set off alarms in Swiss watch circles, given the industry's huge reliance on the region. The Hong Kong, China and Taiwan markets accounted for nearly a quarter (24%) of the value of Swiss watch exports last year.

For the industry's two biggest groups, the exposure is even higher. Credit Suisse estimates that approximately 45% of Swatch Group sales go to Chinese consumers. Morgan Stanley, in a report issued in December 2018, puts the figure even higher: Chinese nationals account for 50% of Swatch Group sales and profits for 2018, it says.

For Richemont, the exposure is 40%, according to Morgan Stanley.

That's one reason their share prices performed so poorly in the second half of last year. Between June 2018 and January 2019, Swatch Group shares fell 40%, according to Credit Suisse. Between last May and this January, Richemont's fell 30%. The stocks of the Swatch Group and Richemont were the worst performers of all the public companies in the European luxury goods sector, Credit Suisse said.

Following the Swatch Group's results presentation for fiscal 2018 on January 31, Credit Suisse issued a forecast of +4% organic growth for the group in the current fiscal year, ending December 31. Richemont's fiscal year ends on March 31, 2019.

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