The Federation of the Swiss Watch Industry (FH) reports that 2021 was a record year for the trade, with Swiss watchmakers registering CHF22.3 billion in export value, which is a new record. This record was established in 2014 on the back of CHF22.25 billion worth of exports; the FH bases its reports on the export value of the watches, not sales to end customers.
While this may seem like astonishingly good news, and we will break it down to some key performance notes from some groups and independents, it masks some key facts. Chief amongst this is the continued downward trend in terms of volume, with only 15.7 million timepieces exported. This is a decline of 4.9 million compared with 2019, and is largely due to a massive drop in the export of watches under CHF500. Unusually, the largest watchmaking group of all, the Swatch Group reported growth (versus 2020) in all segments, high and low, although this may be due to higher sales in the above CHF500 category within the various brands.
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The FH report highlights our own concern about under-realised potential in all categories of watches under CHF3,000. To look at something specific between CHF500 and CHF3,000, the example of the Tissot PRX is telling. Reports from all over the world indicate that the model, both quartz and automatic, is highly sought-after but it is alone in drawing this sort of interest (in its own price category).
It is also worth noting that Tissot had been under pressure (reportedly from shareholders) to deliver the sort of watch that could challenge smartwatches in recent years, and it has alleviated that pressure by working around it. Nevertheless, Swiss watchmakers will still have to find an answer to the smartwatch — and that means taking the fight to Apple of course. To be fair here, the Japanese giants have also yet to find the right product programming to counter the smartwatch.
Moving on, Audemars Piguet made waves by staying consistent throughout the pandemic, leading to revenues of CHF1.6 billion in 2021 (compared with CHF1.2 billion in 2019). The Le Brassus firm is known for achieving higher sales figures by focussing on improved value rather than on increased production, and has previously attributed its growth to this strategy. Improved value here means selling a watch in gold as opposed to steel, or pricing steel watches at the level of gold, and then upping the price of gold models as well. Once again, watch brands demonstrate that the path to success lies in moving up the value chain, rather than increasing volume.
Returning to the major groups, Richemont posted a 20 per cent increase in sales (over 2019 figures) across all watchmaking brands in 2021 (April-December). Swatch Group, on the other hand, reported that net sales for the calendar year 2021 remained down versus 2019 to the tune of 7.4 per cent. The Group did not reveal performance by brand nor by price category so it is impossible to know if the unfavourable result is down to the aforementioned drop in the lower price segments. Swatch Group anticipates double-digit growth for this year overall so perhaps there is a plan that builds on the success of the PRX.
As for LVMH, the world’s largest luxury conglomerate, 2021 was a banner year, thanks to the inclusion of Tiffany & Co. results for the first time. Even without the brand — which is now the group’s biggest jewellery asset — LVMH beat its 2019 performance by 9 per cent. If one includes Tiffany & Co., revenue more than doubled, hitting close to €9 billion.
Perhaps the most interesting bit of trade news recently came from another conglomerate, Kering. The group announced it was divesting from the two fine watchmaking brands it owns, Ulysse Nardin and Girard-Perregaux, with the management team of those brands taking them independent. Patrick Pruniaux, CEO of both Ulysse Nardin and Girard-Perregaux, will thus remain in the hotseat, and has provided the first details of this development to Hodinkee, courtesy of an exclusive interview. This might be a key development, because of all the attention showered on the major independent watchmaking brands. Although he does not explicitly say so, the potential for Ulysse Nardin and Girard-Perregaux as brands operating outside the prerogatives of a publicly traded group is strong.
On that note, Rolex (and Tudor), Patek Philippe, Chopard, Franck Muller, Richard Mille and Breitling release figures in their own fashion (that is to say not at all, in some cases). Some are chasing growth while others are only concerned with pursuing internally consistent values. While we await the Morgan Stanley annual report on the watch industry (out in March this year), we note that the 2021 report already had the Wilsdorf Foundation (owner of Rolex and Tudor) beating every other major group, with some 26.8 per cent of retail market share in 2020.
While not entirely accurate, one can use that market share alongside with the FH data to estimate combined revenue for Rolex and Tudor in 2021. The reason this is far from accurate is that the FH measures export value, not actual sales of watches to end customers, and the market share report concerns only Rolex. Presumably then, Rolex and Tudor have earned more than CHF5.98 billion in 2021, or more than the CHF7.3 billion posted by Swatch Group (with an estimated market share of 25.2 per cent). If anyone would confirm it, the second possibility would be truly noteworthy.
Anyway, anecdotal reports about demand for Rolex watches in particular tell us that we should expect outstanding numbers from the brand, although supply disruptions may be somewhat responsible for the current crunch. The RealReal modestly reports that pre-owned 126610LN references are worth 260 per cent of the recommended retail price. Impressive capital appreciation aside, this figure also indicates that the watch is difficult to buy new from authorised dealers — and that anyone who somehow manages to do so has bought something worth far more than the sticker price.
We will no doubt return to these facts and figures once the new Morgan Stanley report is out, but we note with interest that The RealReal reports strong collector interest in buying (pre-owned) Cartier and Franck Muller watches.
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