Morgan Stanley: Swiss Watchmakers Face Challenging Environment

The Swatch Group SA UHR and Compagnie Financiere Richemont SA CFR dropped 20 percent last week following the Swiss National Bank's move to de-peg the Swiss franc from the euro. As a result, analysts at Morgan Stanley took a look at how the two companies are responding.

For Swatch, Morgan Stanley sees the higher Swiss as a 15 percent impact on profit, the result of an 8 percent impact on sales, as well as a higher cost base for production. To counteract an impact on profit, Swatch announced price hikes of 5-10 percent.

The analysts note that they prefer Richemont, which may have potential to move some of its production outside of Switzerland  (the Cartier brand for example.) Morgan Stanley estimates that a 10 percent move in the Franc will result in a 12 percent impact on Richemont’s earnings. Richemont has announced price increases in the “mid-single digits.”

Morgan Stanley notes that it was already a challenging environment, with demand in China and Hong Kong declining precipitously.

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorAnalyst RatingsMorgan Stanley
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!