GENEVA — Swatch Group and Compagnie Financière Richemont, the world’s two leading watch firms, have moved almost simultaneously to adjust their pricing in the aftermath of last week’s surge in the value of the Swiss franc.
Richemont, whose brand bosses are assembled here for the annual Salon International de la Haute Horlogerie watch show, indicated it would raise prices by 5 to 7 percent to dealers in the euro zone. Prices in Swiss francs would remain stable.
Separately, Nick Hayek, chief executive officer of Swatch Group, said, “We will adjust prices in euros for some brands between 5 and 7 percent, up to 10 percent.” Hayek initially made the comments in an interview with Bloomberg, and his spokeswoman Béatrice Howald subsequently confirmed the statement.
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Richemont’s brands include powerhouses like Cartier and IWC as well as specialist watchmakers such as Jaeger-LeCoultre and Vacheron Constantin. Swatch Group’s stable includes upmarket Breguet and Blancpain, as well as Omega, its biggest-selling brand.
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The decisions follow the surprise step last week by Switzerland’s central bank to abandon the floor of 1.20 it had set for the value of the Swiss franc against the euro, a move made more than three years ago to protect Swiss exporters after an earlier sharp rise in the value of the national currency.
The bank’s decision prompted an immediate surge in the franc, an international safe haven currency, with the exchange rate against the euro now up around 19 percent since last week.
Both watch groups said they would give individual brands some discretion to adjust their euro prices, depending on local market conditions. Richemont indicated the precise level of price increases would vary brand to brand, depending on how its subsidiary firms saw themselves positioned in different European markets.
In Swatch Group’s case, Hayek said he was “more reluctant” to push price increases through for its entry level Swatch and Tissot brands, presumably for fear of losing market share.
Neither group has given any indications of what the far stronger Swiss franc will mean for profitability, amid broad fears that margins will inevitably be squeezed, as currency turbulence persists in Europe. Both groups have the overwhelming bulk of their watch production in Switzerland.
Hayek indicated there could be some small benefit, in Swiss franc terms, as some foreign activities would now be cheaper. But he conceded “there might still be a certain negative effect to our sales that I can’t specify at the moment.”
The choice of a 5 to 7 percent range for euro price rises suggests watchmakers will share the pain of the stronger Swiss franc with retailers. Pushing through the full impact of the franc’s surge against the euro would hit sales and potentially market share.
But not raising euro prices while keeping Swiss franc prices stable would potentially hit Swiss retailers, as customers, many of them wealthy foreign tourists buying watches while visiting Switzerland, could buy the same items significantly cheaper in countries using the euro as their currency.
Watchmakers have focused their concerns on the euro, rather than the U.S. dollar, as that is expected to strengthen gradually against the Swiss franc after the initial impact of last week’s announcement.
Retailers have been waiting to see how the watchmakers would react, with many suggesting Richemont, Swatch Group and leading independent watch brands, such as Rolex, were watching each other to see how they would act before making their own decisions.
“There’s not a chance brands will be able to compensate for the currency factors completely. One thing will be affected: margins,” predicted François-Henry Bennahmias, ceo of privately owned Audemars Piguet.