Swiss watch exports set to fall again

ZURICH - Excess stock at retailers and economic weakness in Europe and Asia are set to hit demand for luxury timepieces made by Swatch Group and Richemont , analysts said.

Sales growth in the global luxury market is set to slow sharply this year as Chinese and European customers rein in spending, with Richemont, the maker of Cartier jewellery and watches, feeling the pinch in its Asian markets.

But in October watch exports rose 13.2 percent to 2.1 billion Swiss francs ($2.23 billion), after recording their first decline in 2-1/2 years in September, according to data from the Swiss watch federation, as Asian tourists bought watches in Germany and Italy.

Analysts said this month's rise did not mark an end to the falling trend.

"The market is likely to read this as a small positive for hard luxury players Richemont and Swatch, yet it seems unlikely to us that the expected destocking cycle in watches is coming to an end that early," Citi analyst Thomas Chauvet said. He expects that exports will turn negative again in the coming months.

"The question remains how long will the destocking last," he said, adding it lasted 14 months in the last downturn in 2008/09.

Exports to the Chinese market fell 12.3 percent. China is the third biggest market for Swiss watches behind the U.S. and Hong Kong. Shipments to Hong Kong rose 2.7 percent, the Swiss watch federation said.

The Swiss watch federation still expects a decline in exports rates to 5-10 percent this year, from 19 percent last year. "We are conscious of what is going on in China so we are not surprised," president Jean-Daniel Pasche said.

Shares in Swatch Group were up 0.8 percent and Richemont rose 1.4 percent by 1247 GMT, roughly in line with the European sector index.

A survey among watch industry executives by professional services firm Deloitte found last week that brand leaders worried about a possible slowdown in their main export markets but were still betting on Asia for growth.

This month's appointment of new political leaders in China could support a recovery in underlying luxury demand and gift giving in China, Chauvet said. ($1 = 0.9399 Swiss francs) (Editing by Louise Heavens)