Swiss watchmakers make up for lost time as China sales tick higher

BASEL, Switzerland (Reuters) - Swiss watchmakers expect further sales growth this year, driven by demand from China where a younger generation of shoppers discovers its appetite for watches, executives told Reuters.

The industry is slowly emerging from a severe downturn caused by a Chinese crackdown on gifts for favours, a massive overstock in its top market Hong Kong and the flight of tourists from European shopping capitals due to militant attacks.

"The recovery is there," Jean-Claude Biver, head of French luxury giant LVMH's watch business, said in an interview at the Baselworld trade show on Thursday.

"Maybe it's not quite as powerful as it seems but China is the driving force."

Swiss watch exports, the industry's best measure for market growth, were up 12.8 percent in the first two months of the year, with Hong Kong and China both rising around 30 percent.

That followed a recovery in 2017 as a whole when exports increased 2.7 percent - the first rise after two years of declines.

Luxury firms from handbag makers to fashion labels are tapping into demand from a new generation of Chinese middle class spenders for branded goods.

Biver said younger Chinese were now taking an interest in Swiss timepieces, often preferring wacky and striking designs or sporty models, to the small, discreet watches their parents favoured, and benefiting LVMH brands like Hublot for instance.

"Hublot only entered the Chinese market a few years ago, but in January and February, Greater China was its No.1 market," Biver said, adding he expected Hublot and LVMH stablemates TAG Heuer and Zenith to outperform overall market growth this year, helped by improvements in Europe and the United States too.

LVMH, which owns other businesses like Louis Vuitton, does not break out earnings for its brands, and for most Swiss watchmakers sales are a closely held secret.

But that the more buoyant mood was notable across the Baselworld show, where top labels celebrated new launches with star-studded stunts.

"We are optimistic for 2018, November and December last year already saw an improvement," Karl-Friedrich Scheufele, co-president of family-owned Chopard, told Reuters on the sidelines of a briefing where the brand committed to source all of the gold in its watches and jewellery ethically by July.

Rolf Studer, co-chief executive of Swiss-based independently owned Oris, said he expected double-digit growth this year.

"The key to success over the next years is to play the channels well, not only e-commerce, but also traditional retail that remains the most important channel," he said.

Swiss watch brands are still hesitant to offer products costing thousands or even tens of thousands of dollars online, but many are testing new web ventures.

(Reporting by Silke Koltrowitz and Sarah White; Editing by Matthew Mpoke Bigg)