Table of Contents
Key Points
- Johann Rupert calls for reduced watch production amid declining demand.
- Swiss watch exports have dropped after three years of record growth.
- Richemont faces subdued sales in key markets like China and Hong Kong.
Richemont Chairman and founder Johann Rupert, Africa's wealthiest man, has called on luxury watchmakers to scale back production in response to a slowdown in demand for high-end timepieces.
Speaking at Richemont's annual general meeting, Rupert noted that global demand for luxury watches has "surpassed the boom," citing weaker sales in key markets such as mainland China and Hong Kong.
He emphasized that the industry's focus should shift from chasing volume to adapting to the evolving market conditions.
The Swiss luxury conglomerate, which owns iconic brands like Cartier, Vacheron Constantin, IWC, and Jaeger-LeCoultre, has experienced a decline in watch exports following three consecutive years of record growth.
Contributing factors include the depletion of savings accumulated during the pandemic, high inflation, and the strong Swiss franc, all of which have dampened consumer spending and squeezed profits for luxury watchmakers.
Rupert praised private competitors such as Rolex, Patek Philippe, and Audemars Piguet for exercising restraint by limiting production in these challenging times.
Market challenges and strategic adjustments
Rupert pointed out that Richemont faces unique challenges as a publicly traded company, which must balance market demands with shareholder expectations.
Unlike privately held Swiss competitors, which can weather market fluctuations without the pressure of shareholder scrutiny, Richemont must remain agile and responsive to changing conditions.
To soften the blow from reduced demand, some Swiss watchmakers and component manufacturers have turned to government programs that allow them to furlough employees and cut production temporarily without resorting to layoffs.
Richemont's call for production cuts comes as the broader industry grapples with shrinking Swiss watch exports, which have declined after a sustained period of growth.
As the market cools, Rupert is urging luxury watchmakers to adopt a more cautious strategy to avoid oversupply and preserve the exclusivity and value of their brands.
