Breitling AG’s chief executive officer Georges Kern said he’s “quite confident” the luxury industry has hit bottom, amid a China-led economic slowdown that’s taken a toll on high-end retailers around the world.
“The problem of the Swiss watch industry, of many brands, is that some of them are dependent on the Chinese market,” he said in an interview with Bloomberg Television on Wednesday. “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.”
Swiss watchmakers last week cautioned about a negative outlook for the industry, which has been grappling with the pullback from once-flush shoppers in China, the second-biggest market after the US, and a cornerstone of the global luxury market. The country represents 6 percent of Breitling’s sales, according to Kern.
Buyers of premium timepieces have curbed spending as interest rates soar and geopolitical conflicts intensify, and watch giants like Swatch Group AG, which owns Omega, and Richemont, the group behind brands Vacheron Constantin and IWC, have seen China sales plunge.
Bright spots Kern cited included India, whose luxury infrastructure has been boosted by more distribution and the opening of new malls that have made it easier for people who once shopped abroad to buy at home. Breitling is opening two or three more boutiques in the country, he said, without giving a timeframe.
“The market is there, the wealth is there,” he said. “Many luxury companies are putting lots of effort into that market, including ourselves.”
Earlier this month the Federation of the Swiss Watch Industry, a trade association, also called on Switzerland’s central bank to take steps to weaken the strong franc, which has pressured the industry.
The franc “absolutely” stings, Kern said, with production costs on the rise. Still, he didn’t think the bank could have much influence.
“It’s a free market. The situation is as it is. We need to work on productivity, we need to work on our costs,” he said. “We’ll deal with it.”
By Karen Leigh
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