The market for new high-end luxury watches is still strong and poised for growth, according to the world’s largest watch company and one of the largest retailers in the industry, while the market for pre-owned high-end timepieces continues to weaken.
Shares of Swatch Group (SWGAY) and Watches of Switzerland (WOSG.L) both rose this week after reporting better-than-expected results for the first half of the year.
Swatch Group counts Omega, Blancpain, Breguet and Longines among its luxury brands, while Watches of Switzerland is an authorized dealer for Rolex, Omega, Patek Philippe, Audemars Piguet and Chopard, among others.
At Swatch Group, operating profit rose 36% to $797.23 million in the first half of the year. Net sales increased by a healthy 18% year-on-year as margins also increased.
“What’s really impressive is both the United States and Europe in all price segments,” Nick Hayek, CEO of the Swatch Group, said in an interview with Bloomberg.
At its own and operated stores, Hayek said average sales per store increased by 30% globally. Part of this boom can be attributed to the continued sales success of the Omega MoonSwatch cross collaboration between Swatch and Omega.
“Global demand for Swatch watches and the MoonSwatch not only continued unabated, but actually increased,” the company said in a statement.
Watches of Switzerland reported a 19% increase in revenue to $2.02 billion for the fiscal year ended April 30, matching street estimates, with adjusted EBITDA rising 24% to $263.6 million.
“FY23 was another record year for sales and profitability,” Brian Duffy, CEO of Watches of Switzerland, said in a statement. “While, as expected, the second half of FY23 saw a more challenging trading environment, demand for luxury watches remained strong and continues to outpace supply.”
Indeed, the results of both Swatch Group and Watches of Switzerland reflected the Swiss watch industry in general, with Swiss watch exports rising 14.4% to $2.67 billion in May.
Last year, exports hit a record $27.9 billion. The demand for Rolex, the king of Swiss watches, is so great that the company announced earlier this year that it would be expanding production.
Pre-owned watch market woes
As suggested in the Watches of Switzerland results, the much larger and widespread second-hand market – or so-called gray market – for luxury timepieces has declined more than demand for new watches.
According to data from WatchCharts, an online watch retailer and industry data provider, the Overall Market Index, which tracks a basket of luxury watches, is down 31% since its recent high in March 2022.
An index that tracks Rolex second-hand prices on WatchCharts reached its lowest level since 2021, falling 13.6% over the past year.
High-end Rolex watches ($30,000 and up) are down about 13.5%, but traditionally important watch models such as the stainless steel Submariner, stainless steel and two-tone DateJust, older Daytonas and GMTs remain at the same level as last year without any appreciation, Paul Altieri, CEO of online marketplace Bob’s Watches told Yahoo Finance.
“Lower price Rolex watches have weathered the storm unscathed, making these watches great investment jewelry.”
Luxury watches themselves have skyrocketed in value during the pandemic, and the recent price declines over the past year can be seen as a normal correction bringing the market back into balance.
The weakness in the secondary watch market in recent months has been attributed to factors such as uneven stock market performance, a “crypto winter” that has weighed on digital currencies, and rising interest rates.
“Many people who view watches as investments want to liquidate their assets,” said WatchCharts CEO Charles Tian in an interview with the Wall Street Journal.
“If interest rates go up, suddenly hold other investments or [inflation-adjusted] bonds seems more compelling.”
Pras Subramanian is a reporter for Yahoo Finance. You can follow him Twitter and further Instagram.
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