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Swiss watch industry outlook /Richemont or Swatch Group?
René Weber, Analyst
Luxury Goods analyst
Wealth Management
Jean-Philippe Bertschy, Analyst
Head of Swiss Consumer Research Team
Wealth Management
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- Swiss watch industry - Review 2020
- Swiss watch industry - Outlook 2021
- Swiss watch brands - top 25
- Luxury goods companies - business performance 2020
- Main difference between Richemont (Buy) / Swatch Group (Hold)
- Conclusion
- Future of coverage of Luxury goods/Swiss watch industry at Vontobel
Vontobel Luxury Goods Shop
Overview
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Vontobel Luxury Goods Shop
Analyst, but with watch maker diplomas…
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Vontobel Luxury Goods Shop
Swiss watch exports: by country 2020 / Greater China exposure
Hong Kong 2008-19 no. 1 market – no longer in 2020,
China is the new no. 1, Hong Kong will continue to lose
Greater China 26% of exports in 2020, >30% in 2011
Hong Kong down from 21% (2011) to 10% (2020)
China14.1%
USA11.7%
Hong Kong10.0%
Japan7.0%
UK6.1%
Singapore5.5%
Germany5.2%
UAE4.5%
France3.9%
Italy3.8%
South Korea3.4%
Others24.8%
19.7% 21.2% 20.4%18.9% 18.5%
14.7%12.3% 12.7%
14.2%12.3%
10.0%
6.8%
8.5%7.7%
6.6% 6.3%
6.2%
6.7%7.7%
8.1%9.2% 14.1%
1.9%
1.9%2.0%
2.0% 2.0%
2.0%
1.8%1.5%
1.4%1.4%
1.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Hong Kong China Taiwan
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Vontobel Luxury Goods Shop
Swiss watch exports 2020 / January 2021
Swiss watch exports by country 2020
(change as %)
Swiss watch exports by country January 2021
(change as %)
20.0%
-36.9%
-26.1%
-26.4%
-36.6%
-24.6%
-37.9%
-33.3%
-21.4%
-34.8%
-17.5%
-18.9%
-21.8%
-60.0% -40.0% -20.0% 0.0% 20.0% 40.0%
China
Hong Kong
Japan
Singapore
South Korea
UK
Germany
France
Italy
Spain
US
UAE
TOTAL
58.2%
-8.5%
-20.9%
-1.6%
-36.2%
-20.2%
-13.8%
-22.4%
-24.2%
-44.5%
-11.0%
-11.9%
-11.0%
-60.0% -40.0% -20.0% 0.0% 20.0% 40.0% 60.0% 80.0%
China
Hong Kong
Japan
Singapore
South Korea
UK
Germany
France
Italy
Spain
US
UAE
TOTAL
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Vontobel Luxury Goods Shop
Swiss watch exports 2020 – price categories / electr. vs mech. (value)
Swiss watch exports by price category 2020
(change as %) – high-end 71% of exports
Swiss watch exports by electronic vs mechanical 2020
(change as %) – mechanical watches 86% of exports
-20%-21%
-33%-34%
-21%
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
> CHF3,000
CHF 500-3,000
CHF 200-500
< CHF 200Total
-18%
-34%
-21%
-45%
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
Mechanicalwatches
Electronicwatches
Total
Mechanical watches average price: CHF 2,532
Electronic watches average price: CHF 271
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Swiss wristwatch exports by price point
2010-20 (CHF mns)
Value growth mainly in CHF >3,000, low-end negative
Vontobel Luxury Goods Shop
Swiss watch industry: breakdown by price point
Swiss watch exports 2016-2020 (12-month average)
Growth for low-/high-end and overall (as %)
High-end (71% of value, just 9.7% of units) - as growth driver since 2000 – low-end on a decline!
-40.0%
-35.0%
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Jan 1
6
Apr
16
Jul 16
Okt 16
Ja
n 1
7
Apr
17
Jul 17
Okt 17
Jan 1
8
Apr
18
Jul 18
Okt 18
Ja
n 1
9
Apr
19
Jul 19
Okt
19
Jan 2
0
Apr
20
Jul 20
Okt 20
Jan 2
1
Overall CHF <200 CHF >3,000
1’160 1’332 1’334 1’274 1’248 1’236 1’112 984 946 818 541
1’043 1’244 1’325 1’493 1’559 1’424 1’289 1’343 1’298 1’226 816
3’858 4’439 4’454 4’390 4’342 4’159 3’998 4’203 4’514 4’277
3’398
9’094
11’092
13’093 13’462 13’829 13’407
11’858 12’263 13’182 14’145
11’339
-
5’000
10’000
15’000
20’000
25’000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
CHF 0-200 CHF 200-500 CHF 500-3,000 CHF >3,000
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Swiss wristwatch exports by price point
2019/20 (in units: 13.8 mn, -33% / value: CHF 16.1 bn)
Vontobel Luxury Goods Shop
Swiss watch industry vs Apple watch
Swiss wristwatch exports vs Apple watch 2015-20
(units in mns)
Apple watch launch in 2015: 50% of Swiss watch exports / 2020: 2.5x
Swiss watch exports: Low/mid-end 2000: 25.9 mn / 2015: 23.1 mn / 2019: 15.6 mn / 2020: 9.8 mn
56.3%
4.1%
52.3%
3.4%
19.2%
6.0%
18.8%
5.1%
16.4%
20.8%
19.1%
21.1%
7.6%
69.1%
9.7%
70.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Units 2019 Value 2019 Units 2020 Value 2020
CHF 0-200 CHF 200-500 CHF 500-3,000 CHF >3,000
28.1
25.424.3 23.7
20.6
13.813.611.6
17.7
22.5
28.4
33.9
0
5
10
15
20
25
30
35
40
2015 2016 2017 2018 2019 2020
Swiss watch exports Apple watch
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Vontobel Luxury Goods Shop
Swiss watch exports by quarter 2008-10 / 2019-21 (change %)
Swiss watch exports 3Q08-4Q10 (change as %)
Financial crisis: 2009: -22%, 2010 +22%
Swiss watch exports 4Q19-4Q21E (change as %)
Covid-19: 2020: -22%, 2021 with very strong 2Q21
-10.6%-7.8%
-17.6%
-23.5%
-19.7%
-6.8%
16.5%
22.3%24.8%23.6%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
1%
-7%
-62%
-14%
-3%
6%
50%
10%6%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
4Q19 1Q20 2Q20 3Q20 4Q20 1Q21E 2Q21E 3Q21E 4Q21E
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Vontobel Luxury Goods Shop
Swiss watch exports in CHF and change as % 2008-22E
Swiss watch exports 2008-22E (CHF bns)
2021 +18% still well below 2019 level
Swiss watch exports 2008-22E (change as %)
Rebound similar as in 2010 but ongoing smartwatch impact
17.0
13.2
16.2
19.3
21.421.822.321.5
19.419.921.221.7
17.0
20.021.2
0.0
5.0
10.0
15.0
20.0
25.0
08 09 10 11 12 13 14 15 16 15 18 19 20 21E 22E
6.7%
-22.3%
22.2%
19.4%
11.0%
1.9% 1.9%
-3.2%
-9.9%
2.7%
6.3%
2.5%
-21.8%
17.8%
6.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
08 09 10 11 12 13 14 15 16 15 18 19 20 21E 22E
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Vontobel Luxury Goods ShopSwiss watch brands: top 25 – sales 2020 (CHF mns, Vont E) 1)
1) Sales not directly comparable as it also includes some own mono-brand store sales
4’950
1’200
1’080
480
430
320
260
240
210
1’590
1’170
620
270
270
250
230
1’520
620
400
370
350
310
540
480
340
- 500 1’000 1’500 2’000 2’500 3’000 3’500 4’000 4’500 5’000
Rolex
Omega
Cartier
Patek Philippe
Longines
Audemars Piguet
Tissot
IWC
TAG Heuer
Hublot
Breitling
Chopard
Jaeger-LeCoultre
Vacheron Const.
Panerai
Bulgari
Richard Mille
Piaget
Blancpain
Breguet
Tudor
Rado
Franck Muller
Swatch
Hermès
Others Swatch Group Richemont LVMH
Rolex25%
Swatch Group22%
Richemont17%
LVMH7%
Others29%
Swiss watch industry:
Market share 2020 (value)
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Vontobel Luxury Goods Shop
Global watch/smartwatch producers (2020)
Watch sales 2020 (CHF mns)
Apple watch sales almost double the Rolex level,
Garmin up from no. 6 to no. 5
Watch sales change (2020, in CHF, as %)
Only Apple watch and Garmin with growth
Swatch Group and foreign companies with sharper declines
1) Rolex sales not retail – sell to watch retailers
1) Apples watch units: +19% / Garmin outdoor/fitness sales in USD: +24%
5’210
4’650
4’230
1’450
1’200
1’080
1’209
925
840
9’500
2’275
0 2’000 4’000 6’000 8’000 10’000
Apple Watch
Rolex
Swatch Group
Richemont
Garmin outdoor/fitness
LVMH
Fossil
Patek Philippe
Audemars Piguet
Seiko
Citizen
Swiss watch companies Foreign watch companies Wearable companies
12%
-15%
-32%
-26%
17%
-27%
-33%
-20%
-8%
-28%
-34%
-40% -30% -20% -10% 0% 10% 20%
Apple Watch
Rolex
Swatch Group
Richemont
Garmin outdoor/fitness
LVMH
Fossil
Patek Philippe
Audemars Piguet
Seiko
Citizen
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Vontobel Luxury Goods Shop
Luxury goods companies : FY20 results
Organic sales growth FY20 (as %)
average: -20% (1H -35%, 2H -5%)
4Q just -1% with Asia ex Japan +19%, Europe -23%
EBIT margin FY20 vs FY19 (as %)
Hermès still >30%, also Kering/LVMH with small decline
Swatch Group with largest decline
-33%
-6%
-16%
-16%
-23%
-22%
-18%
-16%
-9%
-25%
-29%
-22%
-35% -30% -25% -20% -15% -10% -5% 0%
S. Ferragamo
Hermès
Kering Luxury
LVMH
- LVMH W&J
Prada
Tiffany
Richemont
- CFR Jewellery M.
- CFR Specialist Watchm.
Swatch Group
Swiss watch exports
10.9%
34.0%
30.1%
21.4%
33.0%
16.7%
9.5%
10.7%
28.8%
12.4%
-2.9%
31.0%
23.9%
18.6%
33.9%
9.0%
0.8%
8.7%
28.3%
0.9%
-10.0% 0.0% 10.0% 20.0% 30.0% 40.0%
S. Ferragamo
Hermès
Kering
LVMH
- LVMH F&L
- LVMH W&J
Prada
Richemont 1)
- Jewellery Maisons
Swatch Group
2019 2020
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Vontobel Luxury Goods Shop
Comparison: Richemont vs Swatch Group – sales by product 2020
Richemont: sales by product 1H20/21 (as %) Swatch Group: sales by product 2020 (as %)
Jewellery41%
Watches32%
Clothing16%
Leather Goods/Acces
sories9%
Others2%
High-end watches
41%
Upper-end watches
28%
Low-/mid-end watches
18%
Jewellery7%
Watch components
1%
Electronic systems
5%
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Vontobel Luxury Goods Shop
Comparison: Richemont vs Swatch Group – sales by brand 2020
Richemont: sales by brand 2019/20 (as %) Swatch Group: sales by brand 2020 (as %)
Cartier40%
Van Cleef&Arpels
11%Montblanc
6%IWC5%
Jaeger-LeCoultre
3%
Piaget3%
Vacheron Constantin
3%
Officine Panerai
3%
Chloé2%
Online Distributors
17%
Others7%
Omega28%
Longines21%
Tissot11%
Harry Winston9%
Blancpain5%
Breguet5%
Rado4%
Swatch4%
other brands7%
Watch comp.1% El. Systems
5%
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Vontobel Luxury Goods ShopComparison: Richemont vs Swatch Group – EBIT margin 2012-22E
23.9% 24.2%25.6%
18.6%16.6% 16.8%
15.6%
10.7%8.7%
12.5%14.2%
34.9% 34.8% 34.9%
31.3%
28.4%29.9%
31.5%
28.8% 28.3% 29.1%30.3%
25.4%27.4%
20.1%
17.2%
10.7%12.5%
13.6%12.4%
0.9%
11.3%12.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E
Richemont Richemont-Jewellery Maisons Swatch Group
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– Swiss watch industry with rebound in 2021 (+18% after -22% in 2020)
– top brands still have waiting lists (Rolex, Patek Philippe, Audemars Piguet) – all outperformers in 2020
– low-/mid-end will continue to underperform – smartwatch competition
– Mainland China as main growth driver given that travelling will not be back in 2021 yet – Hainan new top spot
– Swiss watch exports in 2021 CHF 20.0 bn – still well below 2019 level (CHF 21.7 bn)
– Smartwatch makers outperforming traditional watch producers
– Apple watch and Garmin with strong double-digit growth in 2020
– traditional watch producers like Swatch Group, Fossil, Citizen with decline of >-30% in 2020
– Apple watch in units already 2.5x of total Swiss watch industry
– Leather goods and jewelry with much stronger performance than watches in 2020
– Hermès (-6%) and LVMH Fashion & Leather Goods (-3%) far ahead of other luxury goods companies
– Richemont’s Jewellery Maisons also only -9% in 2020
– Swiss watch exports -22% in 2020, but Swatch Group even -32% but also Richemont Specialist Watches -26%
– EBIT margin with largest decline at Swatch Group, whereas leather goods/jewelry brands still high
– Richemont: Buy (PT CHF 100) / Swatch Group: Hold (PT CHF 270)
– Richemont with jewelry as core (41% of sales; watches 32%); Jewellery Maisons is a high-margin business;
Specialist Watchmakers with turnaround, Online Distribution/Other brands more limited losses
– Swatch Group with 90% in watches; 20% in low-/mid-end - impacted by smartwatch; further store closures likely
Vontobel Luxury Goods ShopConclusion: Swiss watch industry outlook/Richemont or Swatch Group
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Vontobel Luxury Goods Shop
Future of luxury goods/Swiss watch industry coverage at Vontobel
René Weber: early retirement as of 1 May 2021 Jean-Philippe Bertschy:
- 25 years experience in research
- 11 years experience at Vontobel
- 5 years as Head of Consumer Research Team
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Investment Idea
Platforms & Services
Pascal Ramseier, MBA
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Investment Idea
Swatch – SELLHold PT CHF 270.-
Richemont – BUYBuy PT CHF 100.-
“Past performance is not a reliable indicator of future results.”
SWITCH IDEA
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Investment Idea
Reduce risk Swatch Barrier Reverse Convertible
Take opportunity Richemont
with risk buffer Capped Bonus Certificate
Capped Bonus Certificate Issuer Vontobel
Currency CHF
Tenor 9 months
Strike 100%
Cap 117%
Barrier 75% (Cont.)
Delivery Physical
Barrier Reverse ConvertibleIssuer Vontobel
Currency CHF
Tenor 6 months
Strike 100%
Barrier 75% (Cont.) // (Fixing)
Delivery Physical
Coupon 7.06% p.a. // 4.17% p.a.
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