Tag Heuer, the biggest watch brand within French luxury group LVMH (TICKER:LVMH), has cut some management and production jobs in Switzerland in response to an industry slowdown, the head of LVMH watches said on Monday.
Jean-Claude Biver said Tag Heuer had cut 46 managerial and production positions and placed 49 people on temporary unemployment from Sept. 1 until the end of the year.
Continue Reading Below
Biver said the cuts resulted from having decided to produce only one chronometer movement as opposed to two, and to focus on the group's core business of watches priced between 1,000 euros ($1,270) and 4,000, as opposed to more expensive items.
Biver said most of the cuts would affect Tag Heuer's sites in La Chaux-de-Fonds and Chevenez in Switzerland, where he estimated the brand's total staff to be around 600, of which 400 are in production.
Biver said the cuts were not only related to events in Hong Kong but said Tag Heuer had put on ice plans to rent a new shop in the city for sister LVMH brand Hublot.
Pro-democracy protesters in Hong Kong have been in a stand-off with police in the worst unrest since the territory's 1997 handover from Britain, that has scared off tourists and put pressure on retailers' sales.
"We have seen fewer Chinese, and particularly wealthy Chinese, coming to Hong Kong," Biver told Reuters. "And this of course affects the industry."
However, Biver said he was not planning any cuts at Hublot, as its sales were up more than 10 percent since the beginning of the year, or at LVMH's Zenith brand.
Luxury watch makers are grappling with political instability in Hong Kong, the leading market for Swiss watches, and weak demand in China, where a government crackdown on expensive gift giving has hurt sales of upmarket timepieces.
Richemont's <CFR.VX> flagship brand Cartier said on Friday it would reduce working hours for 230 employees at one of its watchmaking factories in Switzerland due to slowing demand.
Earlier this month, Richemont flagged weakening demand in Asia, its biggest market, while Italian fashion group Prada <1913.HK> said it expected no revenue growth this year and would open fewer stores.
Luxury goods stocks fell on Monday on the back of the political unrest, with industry leader Swatch Group <UHR.VX> closing down 2 percent, LVMH down 1.5 percent and Richemont down 1.7 percent. European stocks as a whole <.FTEU3> fell 0.4 percent.
Analysts estimate between 10 and 15 percent of luxury goods sales are made in Hong Kong and the city represents more than 20 percent of luxury watch sales.
For Richemont alone, Hong Kong represents around 17 percent of sales, while for Swatch Group it delivers 15 percent of revenue, estimated luxury goods analyst Jon Cox at brokerage Kepler Cheuvreux.
Kepler Cheuvreux last week cut its growth assumptions for the Swiss watch market this year to 3.5 percent from 5.5 percent, principally due to weakness in Hong Kong.
(By Astrid Wendlandt; Editing by James Regan and David Holmes)