Slower Swiss Watch Growth Leads to LVMH’s Tag Heuer Job Cuts

By Corinne Gretler

The Swiss watch market is growing at a slower pace than expected, leading to reduced production and job cuts at the Tag Heuer brand, according to the head of LVMH Moet Hennessy Louis Vuitton SA’s (MC) timepiece unit.
The industry grew by 2.7 percent through August, Jean-Claude Biver said in an interview with L’Agefi, less than his forecast for 2014 growth of 4 percent to 6 percent. His comments were confirmed by a company representative.
LVMH’s Tag Heuer unit will cut 46 jobs in management and production and has put 49 employees on partial unemployment, Biver said in an e-mail. Cartier, a brand owned by Cie. Financiere Richemont SA, (CFR) said last week it is introducing a shortened work week for 230 employees at a Swiss factory.
A crackdown on extravagance among Chinese government officials has weighed on Swiss watchmakers in Hong Kong and China, two of their three biggest export markets. The country’s shipments of timepieces rose 1.9 percent in 2013, the slowest rate since the financial crisis. The average growth rate was 17 percent in
the three years to 2012.
“What we’re seeing now are adaption measures to gain control of inventory,” said Patrik Lang, an analyst at Julius Baer Group Ltd. in Zurich. “It was clearly worse in 2009, though that was also in connection with the financial crisis. We’re coming out of a boom and the situation is returning to normal, but one needs to keep an eye on it. I don’t think we can expect a recovery in the coming months.”

‘Better Communication’

LVMH shares dropped 1.2 percent to 129.3 euros at 12:24 p.m. in Paris, extending their decline this year to 2.5 percent. Richemont slid 2 percent to 78.75 Swiss francs, the lowest price since June 2013. Swatch fell 1.3 percent to 456.70 francs, the lowest price since December 2012.
Tag Heuer’s decision is partly linked to dropping production, as well as “in general trying to rationalize the organization of each department in order to gain agility, simplicity and better communication,” Biver wrote. The unit employs about 1,600 people, according to L’Agefi.
Cartier’s shortened week for workers in Villars-sur-Glane in Switzerland is because of slow watch orders, La Liberte reported Sept. 26. Those staff affected will be asked to stay home three days a week as of Nov. 1, according to the report. A company spokesman confirmed the reduction of working hours.
Biver said he doesn’t expect many job cuts in the Swiss watch industry, adding that LVMH’s Hublot brand may create some positions as it “is going very well with double-digit growth” at the end of August. He doesn’t foresee any job cuts at the Zenith brand, which he said is “reviewing its organization.”
Tag Heuer will introduce more products in the price range of 1,500 Swiss francs ($1,575) to 5,500 francs in a bid to take more market share in the segment, Biver said, adding that the brand won’t give up its upper segment.