The Time is Now: How U.S. Luxury Demand is Fueling Swiss Watchmakers' Renaissance

The Swiss watch industry, long synonymous with precision and elegance, faces a pivotal moment. While global markets like China and Hong Kong falter, the U.S. has emerged as the linchpin of growth, defying broader sector declines. For investors, this structural shift in luxury demand offers a compelling entry point into Swiss watchmakers, whose valuations are poised for a resurgence.

The U.S. Market: A Beacon of Resilience

Swiss watch exports to the U.S. surged by 5% in 2024 to CHF 4.4 billion, despite a 2.8% decline in global exports. This outperformance underscores the U.S.'s role as the industry's most stable growth driver. Key factors fueling this trend include:
- Affluent Consumers: The U.S. elite, with $10 billion in annual luxury watch spending, prioritize status symbols like Rolex and Omega, which command premium pricing and collector demand.
- Sustainability and Innovation: Over 30% of buyers now seek eco-friendly practices, while smart luxury watches (e.g., Omega's Paris 2024 edition) capture tech-savvy millennials.
- Geopolitical Shielding: Unlike Asia, where youth unemployment and economic slowdowns have dented demand, the U.S. market remains insulated, driven by robust consumer confidence and rising wealth.

Valuation Catalysts: Why Now is the Time to Invest

The U.S. market's dominance is directly translating to improved profit margins and valuation multiples for Swiss watchmakers:
1. Cost Absorption Strategies Work:
- High-end brands like Rolex and Patek Philippe are absorbing tariff costs (up to 31%) to protect brand loyalty, leveraging their inelastic demand.
- Mid-tier brands (e.g., Tissot under Swatch Group) are sharing costs with retailers, maintaining affordability for mass affluent buyers.

1. Structural Demand is Sticky:
2. The U.S. market's 25% share of global luxury watch sales is growing at 5% annually, outpacing Asia's volatile trajectory.

3. Secondary markets are booming, with pre-owned sales projected to hit $3.7 billion by 2028, offering a secondary revenue stream.

4. Trade Policy Risks are Overstated:

5. While tariffs loom, Swiss brands are agile: accelerating pre-April shipments, diversifying supply chains, and lobbying for exemptions. Historical precedents (e.g., U.S.-EU tariff negotiations) suggest compromise is likely.

Risks and Mitigants

• Tariff Volatility: A prolonged 31% levy could pressure margins. However, brands like LVMH and Richemont (which own Tiffany & Cartier) have diversified portfolios to offset risks.
• Asia's Recovery: A rebound in Chinese demand could reignite global growth, but this is speculative. The U.S. market's stability offers a safer bet.

Investment Thesis: Act Before the Rally

The data is clear: Swiss watchmakers are leveraging the U.S. market to navigate global headwinds. With a $42 billion global luxury watch market and the U.S. as its growth engine, now is the time to invest in companies like:
- Swatch Group: Its $26 billion market cap is undervalued, given its dominance in mid-tier markets and operational agility.
- Richemont (Cartier, IWC): Its $80 billion valuation reflects brand strength and exposure to rising Asian-U.S. dual demand.

Conclusion: The Clock is Ticking

The U.S. luxury market's resilience is no fluke—it's a structural shift driven by wealth, innovation, and geopolitical stability. For investors, this is a rare opportunity to capitalize on a sector where valuation multiples are still undemanding, and long-term tailwinds are assured. Act swiftly: as the world's elite continue to invest in Swiss timepieces, those who move now will reap the rewards.

The hour is late—strike while the iron is hot.