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Swiss watch export growth slows to weakest pace in 3 years

[ZURICH] Swiss watch export growth weakened to the slowest pace in three years as the market for lower-priced timepieces evaporated and the coronavirus outbreak threatens to pummel the industry.

Shipments rose 2.4 per cent to 21.7 billion Swiss francs (S$30.37 billion) in 2019, the Federation of the Swiss Watch Industry said on Tuesday. Exports to Hong Kong dropped 11 per cent as political protests led to store closures in the top export market.

Swiss watchmakers this year will be challenged to find markets to offset China, where consumption will likely slump because of the spread of the viral lung disease. The authorities in that country curbed travel for 40 million people during the Chinese New Year, the peak gifting period. Switzerland exported almost 50 per cent more timepieces to China in December, ahead of an earlier-than-usual Chinese New Year that kicked off on Jan 25.

The coronavirus could lead to a reduction of as much as 8 per cent to earnings for luxury-goods companies this year, RBC analyst Piral Dadhania estimated. Such firms generate some 35 per cent of revenue from Chinese consumers, he added. The Sars epidemic led to a 20 per cent drop in international travel in 2003, according to RBC.

Shipments of Swiss watches by units fell to the lowest level since 1984, down 13 per cent to 20.5 million as the industry focused on limiting production and shifting toward higher-priced models.

Lower-end timepieces have been struggling with competition from fashion labels and smartwatches. That's bad news for Swatch Group AG, which gets a good share of earnings from cheaper brands like its namesake and Tissot. The watchmaker is expected to report 2019 earnings as soon as this week.