Luxury watch companies hit by decrease in margins

The price of gold reaching record levels, already higher than platinum and the ever increasing strength of the Swiss Franc are having a direct negative impact on the performance of Swiss luxury watch companies. Some have already increased prices several times in 2011, with 10 to 15% and are considering further increases this year. If the price of gold, raw material for luxury watches, continues to grow many companies will be forced to accept smaller margins.

Speaking to WWD, the CEO of Hublot, Jean-Claude Biver ”I can’t adjust my prices from one day to another. I must adjust progressively, step by step – but before I have made a full adjustment, I will have lost some margins. If you aren’t ready to lose of gain margins, you can’t do business. A brand might have the best year to date in turnover, but might eventually suffer in terms of margins”.

Patek Phillippe is among the top luxury watch brand which have already made two price adjustments this year, 10% in February and 7,5% in July. The company’s CEO of its US subsidiary said his company which is family owned is very cautious about making a third increase. He added ”It’s much easier to go up than to ever go down in price. So when we move up, we move very slowly and very cautiously. Frankly speaking, we don’t want to get caught where the dollar gets stronger and swings the other way and we are overpriced”.