Swiss watchmakers mull price hike on surging franc

Switzerland's luxury watchmakers are considering raising prices on their timepieces in the eurozone by up to seven percent due to the ballooning franc, but they are in no rush, industry insiders hinted Tuesday.
Watchmakers gathered at a luxury watch show in Geneva this week were eager in public to put on a strong face after the Swiss central bank's shock decision on Thursday to let the franc float.
"We will find a way to adapt," said Swiss luxury group Richemont, which counts Cartier and Piaget among its 16 luxury watch brands.
The industry, which exports nearly 95 percent of its pricey products to areas where they are paid for in euros or dollars, is especially exposed to the impact of the swelling franc.
The Swiss central bank stunned the world Thursday by abandoning its bid to hold down the value of the Swiss franc, scrapping the minimum rate of 1.20 francs against the euro. On Tuesday the franc was trading around parity with the European common currency.
If watchmakers adjust their prices to the new reality, the price tag on their goods in countries using the euro would leap 15-20 percent overnight.
Executives from the big brands were reluctant to talk about the issue or to discuss what measures they might be forced to take.
Behind the cover of anonymity, some however acknowledged estimates that prices in the neighbouring eurozone should be raised 5.0-7.0 percent.
But all insisted it was too early to act, and that they would wait and see how the exchange rate evolved.
That would be good news for retailers gathered at the Geneva trade show, where many stock up on luxury timepieces for the year to come.
"We haven't yet decided if we need to cut back on the number of watches we buy, because (the franc surge) was not expected. We'll have to see what the final prices look like," said Rossi Bruna, the owner of an Italian watch store.
Analysts meanwhile expect Swiss watchmakers to raise their euro prices by around five percent due to the impact the currency change will inevitably have on their margins.
This "will impact the demand side. We accordingly no longer expect Swiss watch exports to rise in 2015," Vontobel said in a note.
The firm, which had previously forecasted four percent market growth, said it now expected a "flat trend, which would already be a good achievement."
Richemont, which makes most of its sales in the less-affected US currency, will not be as affected as others, one executive said on condition of anonymity.