Renowned Swiss watch brand Omega, known for its iconic Speedmaster and Seamaster models, has recently made the decision to raise its prices by up to 8%. This move, although potentially detrimental to sales, is seen as a strategic response to the struggles faced by other watch brands within the Swatch Group AG.
Omega implemented a 2% price increase in Switzerland and China, while the United States, its largest export market, saw an 8% increase. This adjustment could have an impact on Omega’s sales volumes, as it currently ranks as the third-biggest Swiss watch brand in terms of revenue generation.
Morgan Stanley, an investment bank, conducted a report suggesting that the price increase reflects weakness rather than strength. The Swatch Group, parent company of Omega, has increasingly relied on Omega’s cash flow due to the struggles faced by other leading brands under its umbrella, such as Longines, Tissot, and Breguet, in growing their revenue.
Despite Swatch Group’s reliance on Omega for sales and operating profit in 2022, the recent price hikes may potentially hinder the brand’s sales growth. Omega recently launched new versions of its Seamaster diving watch collection in celebration of its 75th anniversary. However, these price increases may exert pressure on the brand’s sales growth.
In 2021, the United States overtook China as the top export market for Swiss timepieces. Although there has been a recent decline in exports to the US, there are indications of a rebound in May. Unlike Rolex, the largest Swiss watchmaker with high demand for its models, Omega watches, valued at approximately $2.8 billion, are more readily available.
Morgan Stanley analysts predict that the price increases could lead to a decline in Omega’s sales volumes, primarily because the brand is not actively creating scarcity for its best-selling models. In February, Omega, along with other Swatch brands like Longines and Tissot, also raised prices in the UK and Europe.
Data from WatchCharts reveals that most Omega watches in the secondary market are traded below their retail price, while Rolex models are often traded at a premium. This suggests that Omega does not possess the same level of scarcity value as Rolex.
Ultimately, Omega’s decision to raise prices amidst the challenges faced by the Swatch Group highlights its reliance on the brand’s cash flow. While the price increase may have implications for sales volumes, only time will tell how Omega will fare in the luxury watch market.
Useful links:
– Omega official website
– Morgan Stanley official website
