Luxury Markets and the Coronavirus

Goals

To give an overview of the Art, Watches, and Cars luxury market and give a general overview of the performance of assets in each of these markets.

Early Findings

Luxury Watches

  • Due to the coronavirus, Rolex, Hublot, Patek Philippe, Audemars Piguet, and MB&F have all announced that they would temporarily close up shop. Both the head office and production sites of Patek Philippe, in particular, will be closed until at least March 27.
  • LVMH (which owns Hublot, Tag Heuer, Zenith, and Bulgari) and Swatch Group (which owns Omega, Breguet, Harry Winston, Blancpain, Glashutte Original and Jacquet Droz) have yet to make any major statements.

Watches of Switzerland

  • Despite a big drop in Chinese shoppers due to the coronavirus outbreak, sales at luxury retailer Watches of Switzerland have remained strong.
  • "Demand for its high-end watches was so strong that they had been able to maintain sales despite the number of Chinese visitors to its stores falling". However, their competitors in Switzerland and Hong Kong had been far more badly affected.
  • Chinese tourists only accounted for 7.8% of business in their retail group for the nine months to January.
  • "Demand for luxury watch brands in the UK and the US continues to exceed supply."
  • Trading figures for the group showed "revenues of almost £258 million in the three months to January 26, almost 13% up on the same time last year."
  • Rolex is outperforming other brands, which helps Watches of Switzerland as the number one Rolex retailer in the UK.
  • "The Watches of Switzerland Group has 127 core showrooms across the UK and US, including 22 dedicated single-brand stores in partnership with Rolex, TAG Heuer, Omega and Breitling."

Impact on Swiss Watches

  • One expert notes that "roughly 97% of all watches that hit the market in Switzerland won't rise in value."
  • However, it was predicted that while the coronavirus pandemic has currently dampened Chinese demand for luxury watches, in the future China's wealthy will likely continue to favor Swiss luxury watches.
  • Tourists from China, have traditionally been the biggest buyers of Swiss watches.
  • In 2019, even before the impact of the coronavirus, companies in Switzerland were struggling to move the same number of watches as they did in previous years, as it was partly affected by Chinese imposed Visa restrictions. Luxury groups such as Swatch, Richemont and LVMH are particularly at risk due to the drop in Chinese sales.
  • Even before the coronavirus made an impact, timepiece makers were already struggling to convince shoppers about the value of luxury timepieces.
  • One expert notes that the best pieces to invest in would be the "Rolex Daytona (steel and bicolor), Patek Philippe Nautilus, and Audemars Piguet's Royal Oak, as these brands and their various models are among the 20 priciest timepieces sold at auction. Other models and other brands, may result in investors waiting as long as 50 years for the timepieces to rise in value."

Summary

  • For the initial hour, we were able to gather insights specifically for the luxury watch market, we were able to identify insights on the impact of the coronavirus and the general performance of this market.
  • We recommend continuing the research to identify insights for the luxury Art and Car market. In the course of our research, we also came across additional insights on the impact of the coronavirus on the overall luxury market, which might be of interest.
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