The market for new high-end luxury watches is still strong and poised for growth, according to the world’s largest watch company and one of the industry's biggest retailers, as the market for pre-owned high end timepieces continues to soften.
Shares of Swatch Group (SWGAY) and Watches of Switzerland (WOSG.L) both rose this week after reporting better than expected results for the first half of the year.
Swatch Group counts Omega, Blancpain, Breguet, and Longines among its luxury brands, while Watches of Switzerland is an authorized dealer for Rolex, Omega, Patek Philippe, Audemars Piguet, and Chopard among others.
At Swatch Group, operating profit climbed 36% to $797.23 million in the first half of the year. Net sales climbed a healthy 18% versus a year ago as margins expanded as well.
"What is really impressive is the United States as well as Europe across all price segments," Swatch Group CEO Nick Hayek said in an interview with Bloomberg.
In its owned and operated stores, Hayek said average sales per store rose 30% worldwide. Part of this boom could be attributed to the continued sales success of the Omega MoonSwatch cross collaboration between Swatch and Omega.
"Global demand for Swatch watches and the MoonSwatch not only continued unabated, but even accelerated," the company said in a statement.
Watches of Switzerland reported revenue jumped 19% to $2.02 billion for the fiscal year ending April 30, matching street estimates, with adjusted EBITDA climbing 24% to $263.6 million.
"FY23 was another record year for revenue and profitability," Watches of Switzerland CEO Brian Duffy said in a statement. "Although, as expected, the second half of FY23 saw a more challenging trading environment, luxury watch demand remained strong and continues to exceed supply."
Indeed the results of both Swatch Group and Watches of Switzerland mirrored the Swiss watch industry overall, with Swiss watch exports climbing 14.4% in May to $2.67 billion.
Last year exports hit a record $27.9 billion. Demand has been so strong for Rolex — the king of Swiss watches — that the company announced earlier this year that it was expanding production.
Pre-owned watch market woes
As suggested in Watches of Switzerland's results, however, the much larger and widely followed secondhand market — or so-called grey market — for luxury timepieces has softened more than demand for new watches.
According to data from WatchCharts, an online watch dealer and industry data provider, its Overall Market Index which tracks a basket of luxury watches has fallen 31% since hitting a recent high in March 2022.
An index that tracks Rolex secondhand prices on WatchCharts hit its lowest level since 2021, falling 13.6% in the past year.
"Rolex high-end range watches ($30K and greater) have decreased some 13.5%, but traditionally important watch models like the stainless-steel Submariner, stainless steel and two-tone DateJust, older Daytona’s, and GMT’s remain at parity from the prior year without any appreciation," Paul Altieri, CEO of online marketplace Bob's Watches told Yahoo Finance.
"Lower price point Rolex watches have weathered the storm with no effects making those watches great investment pieces of jewelry."
Luxury watches themselves soared in value during the pandemic, and recent price dips over the past year could be seen as a normal correction bringing the market back into equilibrium.
Weakness in the secondary watch market has been blamed in recent months on factors like uneven stock market performance, a "crypto winter" that has depressed digital currencies, and a rising interest rate environment.
"Many people who think of watches as investments are wanting to liquidate holdings they had," WatchCharts CEO Charles Tian said in an interview with the Wall Street Journal.
"When interest rates go up, suddenly holding other investments or [inflation-adjusted] bonds seems more compelling."
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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