With financial markets reeling, gold and diamond prices soaring and currency markets riding a dizzying seesaw, it would seem the time has come to turn bearish on luxury.
But executives at most Swiss timepiece firms shrug off any omens of gloom. On the contrary, they say the industry is healthier than ever and that emerging markets like China and Russia should outstrip the effects of any drop in demand in the U.S. and Europe.
"Brands that are well presented in emerging markets will flourish," said Bernard Fornas, chief executive officer of Cartier International. "We've opened recently in Russia, Baku [Azerbaijan], Siberia, China....We didn't have those shops in 2001. China is growing. Hong Kong is strong. We are in a position today that we can amortize [the effects of a slowdown elsewhere]."
Exports of Swiss watches grew 25 percent in January thanks to strong demand for the most expensive pieces, according to the Swiss Watch Federation. Industry growth has been spectacular over the last couple of years, with 2007 a record year for most Swiss firms.
"This year we hope for more than 25 percent growth," said Fawaz Gruosi, ceo of De Grisogono, who said he remained bullish thanks to strong sales in his shops through the first few months of 2008, as well as demand for new watch models.
Francesco Trapani, ceo of Bulgari, said, "Emerging markets such as China, Russia, India and the Middle East, which are more and more interested in high-end watches, are creating a strong basis for the future growth of this business."
Piaget ceo Philippe Léopold-Metzger, said, "Sales continue to be excellent, including in March. Two-thirds of our sales come from Asia, the Middle East, Russia and Eastern Europe. This should protect us to a certain extent from a slowdown if it were to materialize. Sales are great in Asia, and in northern Asia in particular."Most key players continue to accelerate shop openings in emerging markets where luxury is flourishing thanks to newly aspirational consumers.
Bulgari opened five stores in Mainland China last year. This spring the Roman jeweler plans to open in Macao, which is quickly becoming a hot spot for jewelry and watches thanks to the boom in casinos there, and twin stores in Hong Kong. Van Cleef & Arpels will double the size of its stores in Beijing and Shanghai and the firm recently opened in Macao and Kuala Lumpur, Malaysia. Piaget just opened a fourth boutique in Taiwan, as well as a fourth in Hong Kong.
"Mainland Chinese now account for more than 25 percent of our worldwide sales," said Leopold-Metzger.
Severin Wunderman, owner of Corum, said, "India, Singapore, Hong Kong, Thailand and Malaysia are all booming in Southeast Asia, except Japan, where we are totally flat. Our total production is [already] sold out for Basel this year."
Thierry Nataf, ceo, president and creative director of Zenith, said "Asia is booming," adding the firm just opened in Shanghai. He said China was Zenith's top growth market, with Taiwan, Singapore, Malaysia, Thailand and Vietnam showing great promise.
"In the next five years, I believe we will continue to see [double-digit] growth in this area of the world," he said.
Trapani agreed. "The region is enjoying very strong growth, counterbalancing the softness in Western countries."
Even in the U.S., at least for now, few warning bells are ringing that luxury watch sales will cool.
"Business is still holding up very well for us," said Andrew J. Block, executive vice president of Tourneau.
While the sinking value of the dollar against the euro and the Swiss franc has caused prices to skyrocket, Block said the above-$5,000 category has shown "tremendous strength."
"We do see an influx of European and South American customers due to the weak dollar," Block said. "It's critical for brands to continue to support the growth of the U.S. market and not turn to other parts of the world because of the weak dollar."Still, as the industry navigates into the more uncertain landscape of 2008, there appear to be myriad challenges. The soaring price of gold, diamonds and other raw materials, on top of the value of the dollar, are among the hurdles.
Last month, Swatch Group, owner of brands including Omega and Breguet, tempered its enthusiasm for continued growth with a word of caution on currencies and raw material prices "creating new challenges."
Some analysts are beginning to raise flags, too.
"In a slowing environment, we believe the watch segment to be the most at risk in terms of momentum," HSBC luxury analysts Antoine Belge and Erwan Rambourg wrote in a recent report. "We do not expect a collapse in demand, but the slowdown of the category could be more spectacular, coming from a higher level."
For the moment, however, executives said meeting demand remained the biggest concern.
"We can't make enough," said Van Cleef & Arpels' worldwide ceo and president Stanislas de Quercize, who added that booming demand for more extraordinary pieces will push the jewelry house's average price points up by 50 percent this year.
Breaking News: @louisvuitton's men's artistic director @mrkimjones is leaving the French fashion house after nearly 7 years. Jones joined Louis Vuitton in 2011, following a three year tenure as creative director of British luxury goods brand Alfred Dunhill. Jones is to exit Louis Vuitton after showing his fall 2018 collection for the brand in Paris on Thursday. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews