"The report comes after rivals Burberry Group Plc and Swatch Group AG announced better-than-expected results, raising the bar for the sector. Richemont's watch brands have suffered from excess inventory, and the company has been buying back unsold products from the market since 2016. Richemont echoed Swatch in saying that protests in Hong Kong, the top export market for Swiss watches, weighed on sales due to store closures and lower tourist arrivals," Yahoo Finance reported.
Richemont stated that watch sales were more subdued during the first three months of the year as it has introduced most of its new timepieces this year during the second quarter. "It's also been trimming its distribution network in an attempt to make its products scarcer, leading to a two percent drop in wholesale watch revenue," Yahoo Finance wrote.
Similar to the Swatch group, Richemont's drop in watch sales is also the result of its efforts to reduce the grey dealer market and the slow market demand for its exclusive brands such as IWC, Vacheron Constantin and Panerai.
The Federation of the Swiss Watch Industry reported that in June Switzerland's exports of timepieceshad decreased 11 percent. Shipments to declined 27 percent in June and dropped 6.6 percent in the first half. Even before the protests started earlier this year, exports to Hong Kong fell 27 percent. Shifting sales to China from Hong Kong, where margins are typically higher due to lower taxes, is negative for luxury-good makers, analysts observed.