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WRAPUP 1-Swiss watch execs caution on recovery
March 23, 2010 / 2:50 PM / 8 years ago

WRAPUP 1-Swiss watch execs caution on recovery

* Hermes watches warns about possible industry double dip

* Patek Philippe says too early to call end of downturn

* LVMH watch CEO says retailers could still delay purchases

By Astrid Wendlandt and Silke Koltrowitz

BASEL, March 23 (Reuters) - Rising watch sales, boosted by wholesalers restocking, may not be a true sign that the downturn is really over, industry executives said on Tuesday.

The head of Hermes (HRMS.PA) watches said concerns about rising taxes in Europe to help cut bulging state debts could crimp luxury spending while the head of Patek Philippe said consumer demand for watches worldwide remained fragile.

“We could still be in the middle of the tunnel,” Patek Philippe Chairman Thierry Stern told Reuters at the watch industry’s biggest annual fair in Basel. “It is too early to say the crisis is behind us.”

Luc Perramond, Hermes watch chief executive, said the Swiss watch industry could still see a double dip after showing signs of recovery in recent months.

He declined to give a precise sales growth forecast for the current year saying only he expected an increase only if current positive market trends continued.

Concerns about the weak state of the industry were echoed by Philippe Pascale, head of LVMH (LVMH.PA) watches and jewellery, who acknowledged that part of the uptick was due to retailers filling up empty shelves.

He noted that rising orders did not necessarily mean consumers were back in the shops.

“Our orders (at the Basel fair) this yeat beat our expectations but we have to see how the sell-out (when a watch is sold to the end user) will be in the second quarter,” Pascal told Reuters.

“If markets start coughing again, retailers will postpone their purchases.”

Some watch brands such as LVMH’s Hublot and Zenith secure the bulk of their annual sales at the Basel watch fair.

However, Pascal forecast revenues at his division would be up by more than 20 percent on a like-for-like basis in the first quarter.

Pascal also stressed that the revenue jump came against a very low basis as LVMH watch and jewewllery sales fell 40 percent in the first quarter last year.

Swiss watch exports rose for the first time in January this year after suffering their biggest slump in two decades in 2009, dropping to 2006 levels, and in February, they continued their ascent with a 14.2 percent increase.

“We are in a slight recovery phase,” Pascal said.

He said demand in the United States, which collapsed during the downturn, was slowly starting to pick up but Japan, another big luxury market, remained difficult.

Hermes’s Perramond said he was worried about a possible real-estate bubble in China, the main engine of growth for the luxury industry for the past two years.

“One has to remain cool-headed,” Perramond said in an interview with Reuters in Basel.

Hermes watch sales, which make up 5 percent of the group’s total sales, fell 12 percent last year at constant currencies.

The cautious tone contrasted with Swatch Group UHR.VX watch brand executives who said this week they expected 2010 to be another record year, with some such as Longines saying sales could rise by as much as 25 percent.

Longines and Tissot were the only two Swatch brands that enjoyed any growth last year, their executives said.

Editing by David Cowell

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