The coronavirus hits the luxury industry hard – impact on Swiss luxury watches


The coronavirus is currently shaping the media landscape.
And as it seems, the sales of many companies from luxury and lifestyle goods segments.
The luxury watch market also continues to see sharp falls in global equity markets. These slumps are due to the ongoing coronavirus outbreak, which is increasingly becoming a growing threat to luxury companies.

On Monday, 24.02.2020, the value of LVMH shares fell by 5% as an increase in coronavirus cases was reported in Italy. The Swatch Group and Richemont also recorded similar declines.
As stock values fall, there is now a growing suspicion that the virus could spread rapidly in Europe.


Luxury industry under the microscope

Analyst Zuzanna Pusz of investment bank UBS wrote, “The continued spread of the coronavirus increases risks to the luxury industry in the short term.” In particular, a decline in international tourism due to the spread of the virus has a negative impact, as 43 percent of the total luxury industry turnover is made by tourists.


Study confirms billions in profit and revenue slumps

A study by the consulting firm Boston Consulting Group (BCG) confirms that the coronavirus epidemic is likely to cost the luxury goods industry billions in revenue and profits. The study asked 28 CEOs of luxury brand and finance chiefs about their assessment. According to this, the virus could reduce sales by 30 to 40 billion euros and shrink profits by a total of around 10 billion euros.

Most luxury goods companies have already lowered their sales forecasts for the first quarter of 2020. This is due to the high importance of sales in China and Hong Kong, as well as the expenses that Chinese citizens spend on their travels to the global tourist hotspots of London, Paris and New York.


The Swiss Watches Market

Switzerland has been battling the first case of coronavirus since yesterday. For the Swiss watch companies, this means further pressure. Especially with regard to the country’s upcoming watch fairs.
The Swatch Group is probably hit hardest, as its shares have fallen by more than 13% since the beginning of 2020 – in a 52-week comparison, even falling by more than 27%.
Richemont and LVMH are slightly less affected by the decline in Chinese spending, but are also suffering from huge slumps:
Richemont shares have fallen 9.1 percent since the start of the year and 19.5% since their 52-week high.
LVMH shares have fallen 7.9 percent since January 1 and 12.1 percent since their 52-week high.


Consequences of coronavirus

It is already clear that luxury companies will have to contend with the consequences of the economic slowdown. It is estimated that the industry will need about half a year, after exceeding the peak of propagation, to recover.

Simply book a free appointment to continue the conversation, and ask us questions about your business.