Swiss watchmakers are growing concerned about a new threat following the rise of smartwatches, the COVID-19 pandemic, and the highest inflation in decades: the sharply appreciated Swiss franc. The expensive franc is putting pressure on the profit margins of these companies. Additionally, this currency appreciation is occurring at a time when demand for watches is decreasing after a period of unprecedented growth. Top executives from watchmakers such as Oris, Doxa, and Maurice Lacroix explain that the high profit margins achieved last year through price increases have now largely disappeared due to the significant depreciation of the US dollar against the Swiss franc. “This hits hard when the United States is your largest market,” said co-CEO Rolf Studer of Oris. The vast majority of Swiss watches are sold in the United States, Asia, and Western Europe, making currency fluctuations a crucial factor in the sector’s performance. For Stephane Waser, CEO of Maurice Lacroix, checking currency exchange rates every morning has become a daily routine. It doesn’t seem like Swiss watchmakers will get relief anytime soon. With inflation risks still present in Switzerland, it is expected that the Swiss National Bank will keep the interest rate high or possibly raise it further. In contrast, the US Federal Reserve appears to be pausing its interest rate hikes in September. As a result, the franc is likely to continue appreciating against the dollar in the coming months. Swiss watchmakers thrived during the COVID-19 pandemic as consumers turned to online shopping during lockdowns, and watches were in high demand. However, in July of this year, Swiss watch exports showed a monthly decline for the first time in over two years. This was mainly due to weakening exports to China and the United States. As demand decreases, watchmakers may need to further increase their prices to offset losses resulting from the expensive franc.
