How is China's Economic Slowdown Affecting Swiss Watches and Crystal Demand?

Watches of Switzerland, the UK's largest Rolex seller, is facing pressure from activist investor Gatemore to relocate its primary stock listing to the United States. Gatemore, which has acquired 1.9 million shares in the company, argues that the US market offers better growth opportunities compared to the UK, where the stock market is reportedly shrinking at its fastest pace in history, according to Goldman Sachs. Following the announcement, Watches of Switzerland's shares rose over 2%, although they have fallen over a third since the beginning of the year, with a staggering £516 million loss in value occurring in just one day earlier this year [8421862e].

In a related trend, Swiss watch exports have also faced challenges, particularly due to China's economic slowdown. December 2024 saw a sharp decline in Swiss watch exports, dropping 5.4% year-on-year to 2 billion Swiss francs. Annual exports totaled 25.9 billion Swiss francs, marking a 2.8% decrease overall. Key markets such as China experienced a significant decline of 19%, while the U.S. and Japan also saw decreases of 1% and 12.7%, respectively. In contrast, the U.K. market reported a 5.8% increase in watch exports [a471dc03].

CEO Brian Duffy of Watches of Switzerland has acknowledged a shift in consumer spending patterns, which has contributed to the company's declining stock performance. He criticized the UK government's tax-free shopping policy for tourists, suggesting that it has negatively impacted the luxury retail sector. The pressure from Gatemore highlights a broader trend of UK companies considering moves to the US to capitalize on more favorable market conditions and investor sentiment [8421862e].

As the Swiss watch industry grapples with these declines, the crystal market in China is thriving. Consumers are increasingly seeking comfort products, leading to a boost in demand for crystal items, including bracelets. Irene He, a 23-year-old from Wuhan, shared her experience of using crystal bracelets during her job search, illustrating the shift in consumer behavior amidst economic challenges [a471dc03].

This situation reflects a growing concern among UK businesses about the competitiveness of the domestic market, particularly in light of recent reports indicating that medium-sized listed businesses are increasingly being acquired by US firms. The London Stock Exchange has seen a decline in the number of companies listing, with many entrepreneurs expressing frustration over limited financing options in the UK. The government has proposed measures to stimulate investment in domestic equities, but the effectiveness of these initiatives remains to be seen [a4cd9723].

As the UK financial landscape continues to evolve, the case of Watches of Switzerland serves as a poignant example of the challenges faced by British companies in attracting investment and maintaining their market presence. The potential move to the US could signify a pivotal shift in the company's strategy, aligning it more closely with the lucrative American luxury market [8421862e].