Georges Kern, the CEO of Breitling AG, recently expressed optimism regarding the luxury watch sector, asserting that it has reached its low point. His confidence comes amid economic challenges heavily influenced by a slowdown in the Chinese market, a vital area for luxury goods sales.
In an interview with Bloomberg Television, Kern highlighted a significant concern: the dependency of many Swiss brands, including Breitling, on the Chinese market. “The problem of the Swiss watch industry, of many brands, is that some of them are dependent on the Chinese market,” he stated. Baker suggests that the industry needs to adopt a more diversified approach. “You need to have a plane with four, five engines. If one engine doesn’t work, just hope that the other four engines are working,” he elaborated, emphasizing the necessity for strength across all markets.
The current landscape for luxury watchmakers has been precarious. Recent comments from Swiss watchmakers indicate a negative outlook due to a downturn in Chinese spending. With China representing approximately 6% of Breitling’s sales, any decline in this market can lead to significant ramifications. High-end retailers have felt the effects, as buyers have curtailed spending amid rising interest rates and ongoing geopolitical tensions. Giants like Swatch Group AG and Richemont have reported severe drops in their sales from China, particularly for brands such as Omega and Vacheron Constantin.
However, not all news is bleak. Kern pointed to emerging opportunities in markets like India, which are bolstering their luxury retail infrastructure. India’s increasing number of high-end malls and improved distribution channels is making it easier for local consumers to purchase luxury items they once sought abroad. Kern stated, “The market is there, the wealth is there,” underscoring the investment that many luxury companies, including Breitling, are making in this region. Plans are already in motion for Breitling to open two or three additional boutiques in India.
Despite optimism in these alternative markets, Kern also acknowledged challenges that continue to affect the luxury sector. The Swiss franc’s strength has placed further pressures on production costs. Earlier this month, the Federation of the Swiss Watch Industry urged the Swiss central bank to consider measures to weaken the currency in an effort to alleviate some of these pressures. Kern was candid about the challenges posed, stating that while the strong franc “absolutely” stings, he believes the market’s underlying conditions will inevitably necessitate improvements in productivity and cost management.
The situation ultimately underscores a key lesson in business resilience and adaptability. Companies within the luxury segment must recognize the shifting dynamics and be prepared to pivot strategically. Relying solely on established markets like China may no longer be sufficient; embracing a more diversified, globally aware strategy could provide a buffer against regional downturns.
As the luxury watch market grapples with these transformative times, the future path for companies like Breitling will hinge on their ability to innovate and expand beyond traditional dependencies. With proactive steps toward entering and solidifying newer markets, the industry can likely recover from current challenges.
In conclusion, while specific markets may be experiencing headwinds, leaders like Georges Kern remain hopeful. By focusing on growth in diverse regions and actively seeking to manage costs, the luxury watch industry may well find itself on the road to recovery sooner than expected.
