If ending lockdown marks the climb back up to a V-shaped recovery, watchmakers will be among the first to know.
For all their supposed immunity as trinkets of the rich, Swiss watches have been hard hit by the pandemic. March sales of 900,000 steel watches marked a new low for the industry. Exports that month fell 22 per cent to SFr1.4bn ($1.4bn); volumes were two-fifths lower and the Federation of the Swiss Watch Industry expects April to be worse.
Fittingly for timepieces, watches were an early indicator of the wider downturn thanks in part to their reliance on the greater China market. Production figures suggest watch makers are not optimistic. Expectations improved last month as measured by the monthly survey of Swiss watch makers but capacity utilisation rates stood at 78 per cent, which UBS notes is the lowest since records began in 1999.
As with other industries reeling in the wake of the pandemic, watchmakers were facing battles long before the virus struck. An unwillingness to move with the times and embrace smart technology has reined in sales. So has an early reluctance to utilise ecommerce, especially in China where fears of piracy deterred the industry from accessing a key sales channel.
Protests in Hong Kong, which began nearly a year ago, rapidly emptied the streets of high-end mainland shoppers. That saw the territory usurped by the US as the biggest export market for Swiss watches, crimping sales at the likes of Richemont, owner of the IWC and Jaeger-LeCoultre brands. Shares in Swatch are worth less than half their June 2019 peak.
Sales in greater China remain depressed and destocking suggests it may be some time before factories are firing on all cylinders. Unlike mobile phonemakers, watchmakers have largely hit the pause button on new products, a category that typically accounts for a fifth of annual turnover, according to Citi. Time to rethink that recovery trajectory.