Is the Luxury Watch Sector Rising from the Dust?
Hour Glass opened its first boutique in 1979 in Singapore. On top of having a presence in our country, it has grown to establish itself in Malaysia, Australia, Thailand, Japan, and Hong Kong.
Meanwhile, Cortina started operations in 1972 and has a presence in Singapore, Malaysia, Thailand, Indonesia, Hong Kong, and Taiwan at the moment.
The two companies turned in great results in their latest earnings announcements.
For the quarter ended 30 September 2017, Hour Glass saw its quarterly revenue rise 6% year-on-year to S$173 million, while Cortina’s grew 31% to S$117 million. Meanwhile, Hour Glass’s net profit surged 29% to S$10.7 million while Cortina’s more than doubled to slightly below S$6 million.
For the six months ended 30 September 2017, Hour Glass’s revenue grew 8% year-on-year to S$337.4 million while net profit increased 7% to S$17.7 million. As for Cortina, it saw its profit soar 63% to S$8.9 million, driven by a 15% year-on-year increase in revenue to S$210.5 million.
In its earnings release, Hour Glass explained its robust performance for the six-month period:
“Improved consumer sentiment in selective markets in the region and the pickup in overall economic activity in key markets contributed to the Group’s gains, suggesting that luxury brands still have room for growth despite current challenging business conditions.”
Unlike Hour Glass, Cortina did not cite any specific reasons for its growth.
With the aforementioned improvements in Hour Glass’s and Cortina’s businesses over the last six months, is the luxury watch sector seeing an upturn?
The Swiss watch industry’s leading trade association, The Federation of the Swiss Watch Industry FH, releases Swiss watch export numbers every month. Since February 2017, the exports have been growing on a 12-month moving average basis, as seen from the chart below:
Source: The Federation of the Swiss Watch Industry FH (link here)
In October, Swiss watch exports saw a solid monthly increase, and this led the association to comment:
“Watch industry exports continued to profit from the recovery of some key markets and benefited from a very favourable base effect in October. Their value rose sharply (+9.3% against October 2016) to reach more than 1.8 billion francs. Over ten months, the branch confirmed its improvement with growth of 2.4%.”
Even though the Swiss watch export data refers to exports of watches in all price ranges and movement parts, the improvement seen in the businesses of Hour Glass and Cortina suggests that the luxury watch segment has been growing.
But, looking ahead, Hour Glass and Cortina are not proclaiming victory as yet. In its latest earnings announcements, Hour Glass said:
“The global watch sector continues to remain challenging.”
In a similar refrain, Cortina cautioned:
“Market conditions will remain competitive in all the markets that the Group operates in. The social and economics condition will continue to affect the performance of the Group.”
It may be too early to know for sure if the luxury watch sector is on a sustained upturn, but there seems to be some green shoots of recovery. It would be interesting to follow the developments in this space.