May Swiss Watch Exports Edge Up; Recovery Remains Fragile; Top Picks: Richemont and Burberry

Overview

This report analyzes May 2026 Swiss watch export data, noting that while headline figures showed slight growth, this was primarily driven by calendar effects and a low-base rebound in the US market; the underlying recovery remains gradual and fragile. The report further breaks down performance by region, price segment, and material, and provides investment recommendations for the luxury sector based on current macro uncertainties, favoring a defensive allocation focused on names with specific catalysts such as Richemont and Burberry.

Core views

Regional divergence is evident, with the US being the primary source of volatility. Nominal Swiss watch exports grew 0.4% YoY in May; adjusted for calendar effects (two fewer working days in May 2026 vs. 2025), actual growth reached 10.4%. This rebound was entirely driven by the US market, where exports rose 12.3% YoY, benefiting from normalization following a high base last year (April base +149%, May base -25%). However, excluding the US, exports to the rest of the world fell 1.2% YoY (vs. +3.5% in April), primarily dragged down by a higher comparison base in Mainland China. Greater China trends are stabilizing, while the Middle East is weakening. Despite monthly volatility due to base effects, the underlying trend in Greater China (including Hong Kong and Mainland China) remains broadly stable. On a Last Twelve Months (LTM) basis, the decline in Greater China exports narrowed from -1.4% in April to -0.9% in May, indicating slow improvement. In contrast, the Middle East, a growth highlight in 2025, is currently performing poorly, with exports to the UAE and Saudi Arabia falling 13.5% and 5.9% YoY in May, respectively. Growth in the UK (+24.9%) and France (+57%, influenced by its logistics hub role) was mainly attributable to favorable base effects. Price segment and material performance distorted by base effects. Watches priced CHF 200-500 and above CHF 3,000 recorded significant growth, while the CHF 500-3,000 segment saw a notable decline, largely reflecting differences in year-ago bases across price bands. By material, bimetallic watches performed best, with export value up 34% YoY, while precious metals, steel, and other materials all declined. On an LTM basis, overall export volume grew 1.2%, with relatively consistent improvements across price segments, suggesting that demand is undergoing a gradual volume recovery. Investment strategy shifts to defensive; prefer high quality and self-help stories. Given the fragile macro environment, geopolitical tensions, and amplified volatility from short-term investors, the report recommends a more defensive stance. Top preference is given to 'high-quality targets at reasonable valuations,' with Richemont as the top pick due to strong momentum in its jewelry business and industry leadership; Brunello Cucinelli is also favored for its quality and mean reversion potential. Secondarily, focus on 'self-help stories with better trajectories': Burberry's turnaround strategy is showing results after one year, with improved brand momentum and a next phase focusing on store productivity; Ferragamo is in the early stages of transformation, with management addressing brand and retail network issues. LVMH sits between high quality and self-help; despite concerns, its core brand strength and cost efficiency provide support.

Analysis framework

The report employs a typical 'aggregate breakdown + base adjustment' analytical method. First, by comparing nominal YoY figures with calendar/base-adjusted data, it strips out short-term statistical noise to identify true demand trends. Second, using 'regional contribution decomposition,' it breaks down global exports into key markets such as the US, Greater China, Europe, and the Middle East to pinpoint specific sources of growth or decline. Third, through 'price segment and material cross-validation,' it analyzes changes across different consumption tiers and preferences to determine whether shifts represent structural upgrades or cyclical fluctuations. Finally, combining company fundamentals (e.g., brand momentum, turnaround progress, valuation levels), it maps macro/industry data to specific stock recommendations, demonstrating a logical transmission from 'industry beta' to 'stock alpha.'

Methodology notes

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Volume-Price Decomposition

  When analyzing watch exports, the report tracks not only export value (Price × Volume) but also export volume separately to distinguish whether growth stems from price increases or volume gains, thereby assessing actual demand intensity more accurately.

• Event Arbitrage & Behavioral FinanceExpectations Gap/Expectations Management

  Base Effect Analysis

  The report emphasizes the distorting effect of the 'Comparison Base' on YoY data. For instance, an anomalously high figure in a prior-year month can make the current year's YoY comparison appear negative even if underlying performance is flat or slightly positive. Understanding base effects helps investors avoid being misled by headline YoY figures and see the true trend.

• Competition & Strategy FrameworkMoat / competitive advantage

  High Quality vs. Self-Help Stories

  The report categorizes luxury companies into two types: 'High Quality' companies with strong brand moats and stable growth (e.g., Richemont); and 'Self-Help' companies improving fundamentals through strategic adjustments (e.g., Burberry). This classification assists investors in selecting targets with higher certainty or greater elasticity depending on market conditions.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Richemont (CFR.SW)

  Top pick; benefits from strong jewelry momentum and industry leadership

  Strengths

  Strong jewelry segment growth, reasonable valuation, high-quality defensive attributes

  Comparison

  Superior to other pure-play watch-dependent companies; viewed as representative of 'high quality at reasonable valuations'

  Risks

  Further deterioration in macro demand

• Burberry (BRBY.LN)

  Turnaround story gaining traction; improved brand momentum; increased full-price sales

  Strengths

  Significant results from the first year of the Burberry Forward strategy; extended momentum in core outerwear and scarf categories

  Weaknesses

  Turnaround still mid-stage; needs further improvement in store productivity

  Comparison

  Clearer turnaround path with preliminary validation compared to other distressed luxury brands

  Risks

  Turnaround execution misses expectations; shifts in consumer preferences

• LVMH (MC.FP)

  Sits between high quality and self-help; strong core brands but Watches & Spirits division under pressure

  Strengths

  Dior revival; improved cost efficiency; Louis Vuitton remains strong

  Weaknesses

  Uncertainty regarding Watches & Spirits (W&S) turnaround; succession process introduces uncertainty

  Comparison

  More stable than pure self-help plays; greater turnaround elasticity than pure high-quality peers

  Risks

  Slow W&S recovery; management turbulence triggered by family succession

• Ferragamo (SFER.IM)

  Early-stage turnaround; trading at lower end of range; potential for mean reversion

  Strengths

  Experienced management team addressing key issues in brand, product, and retail network

  Weaknesses

  Early stage of turnaround; financial results not yet fully reflected; high valuation volatility

  Comparison

  Higher risk than Burberry, but potentially higher returns; suitable for high-risk appetite

  Risks

  Turnaround failure; continued decline in brand desirability

• Brunello Cucinelli (BC.IM)

  High-quality target; benefits from quality premium and mean reversion

  Strengths

  High brand quality; high customer loyalty; potential mean reversion

  Comparison

  Shares high-quality preference with Richemont but smaller scale; niche market positioning

  Risks

  Slowdown in ultra-high-end consumption demand

Key data

• May Swiss Watch Exports YoY+0.4%Nominal growth, impacted by fewer working days
• May Exports YoY (Calendar-Adjusted)+10.4%Reflects true growth drivers, primarily led by the US
• Ex-US Exports YoY-1.2%Indicates non-US market demand remains soft
• Greater China LTM Exports YoY-0.9%Improved from -1.4% in the prior month; trend stabilizing
• Bimetallic Watch Export Value YoY+34%Strongest performer among all materials
• Richemont Target PriceCHF 200Rating: Outperform; Current Price: CHF 181.90
• Burberry Target PriceGBp 1300Rating: Outperform; Current Price: GBp 1127.50

Impact & implications

The report believes the gradual recovery in Swiss watch demand remains on track, but the path is fraught with uncertainty. Resilience in the US market has partially offset tariff-induced price pressures, while slow improvement in China provides a floor. However, weakness in the Middle East and geopolitical risks remain key concerns. For investors, this implies avoiding chasing short-term beta volatility and instead focusing on companies with independent alpha logic: either leaders establishing advantages through high-growth categories like jewelry (Richemont) or turnaround plays showing initial results with reasonable valuations (Burberry, Ferragamo). As the sector anchor, LVMH's performance will depend on whether the Dior revival can offset weakness in the Watches & Spirits division.

Risks

• Fragile macroeconomic environment damaging consumer confidence
• Escalation of geopolitical tensions impacting global trade and travel
• Prolonged Middle East conflict could lead to reduced travel, higher oil prices, and inflation, indirectly hitting luxury demand
• Short-term investor behavior amplifying sector volatility, causing stock price divergence from fundamentals

What to watch

• Sustainability of US market demand and its ability to absorb tariff-related price increases
• Pace and magnitude of recovery in Greater China (especially Mainland China)
• Developments in the Middle East situation and indirect impacts on luxury consumption
• Execution in subsequent quarters for turnaround companies like Burberry and Ferragamo
• July US export data; potential YoY decline due to a +45% high base in the same period last year