The Swatch Group (UHR) and Richemont (CFR)) share prices have crashed hard in the past few months as investors dump luxury goods companies. Richemont stock was trading at CHF 120, down by over 23% from its highest point this year.
Swatch has done much worse as it crashed to CHF 163, its lowest level since May 2020. It has dropped by almost 50% from its highest point in 2023 and by 65% from its all-time high. It was trading at CHF 475 in November 2013.
Luxury goods stocks have crashed
Swatch Group and Richemont are not the only luxury goods companies that have crashed. In the United Kingdom, Burberry stock has dropped in the last 14 consecutive months and is hovering at its lowest point since September 2010. It has plunged by over 75% from its highest point in 2023, which has led to it being pushed out of the FTSE 100 index.
In France, Kering, the parent company of Gucci, has retreated in the last three consecutive months and is down by over 64% from its highest point in 2023. This sell-off accelerated after the company published weak financial results and slashed its forward guidance.
Other luxury goods companies like Aston Martin Lagonda, LVMH, Ferragamo, and Hugo Boss have all retreated sharply. Hugo Boss, in particular, has fallen by over 47% and was trading at $35.77, a record low.
Altogether, the ongoing meltdown in the luxury goods market has led to substantial losses in the market. It is estimated that investors have lost over $240 billion during the plunge.
Swatch Group’s demand is waning
Swatch Group, the parent company of popular brands like Omega, Tissot, Longines, Blancpain, and Hamilton has crashed for two main reasons.
First, there is a sense in the investment community that the management has not been forthcoming about its business. Nick Hayek, the CEO, has often been accused of not providing clear answers to analysts. Most recently, he told investors who did not like the company to stash their funds elsewhere.
Second, the company’s financial results have not been all that good because of the ongoing slowdown in China. The most recent numbers showed that its net sales dropped by 14.3% in the first half of the year to CHF 3.44 billion while its operating profit crashed to CHF 204 million.
The company also warned that its financial performance will remain under pressure because of China and Hong Kong. Recent reporting has shown that some of the most popular luxury malls in Hong Kong have been almost empty.
Additional news is that several luxury watchmakers have turned to the Swiss government for support, meaning that the industry is not doing well.
Swatch Group share price analysis
The weekly chart shows that the Swatch Group share price formed a double-top chart pattern around the CHF 300 level. In most periods, a double-top pattern is one of the most bearish patterns in the market.
The stock has dropped below the key support level at CHF 202, its lowest swing since May 2022. In December last year, the 200-week and 50-week moving averages crossed each other, forming a death cross pattern. The path of least resistance for the stock is downwards, with the next point to watch being CHF 133.60, its lowest swing since March 2020.
Richemont’s growth is slowing
Richemont, the parent company of Cartier, Buccellati, Van Cleef & Arpels, IWC, Piaget, and Dunhill is also not doing well as its stock has dropped by over 23% from its highest point this year.
One of its core issues has been its Yoox Net-a-Porter brand, which has constantly made substantial losses such that the company is now considering options.
Like Swatch Group, Richemont’s recent financial results showed that the company was not doing well. Its total quarterly sales rose by just 1% to €5.268 billion.
In China, one of its important markets, sales plunged by 18% to €1.809 billion. This slowdown was offset by a 59% increase in Japan and a 10% increase in the Americas. The company warned that China’s slowdown may continue in the coming months. Richemont’s management will provide more color about its business this week at its annual general meeting in Geneva.
Richemont share price forecast
The weekly chart shows that the Richemont stock price peaked at CHF 156 in 2022 amid the luxury watch boom. It then formed a double-top chart pattern near that level and whose neckline is at CHF 102.95.
The stock has now dropped below the 50-week and 200-week Exponential Moving Averages (EMA). it has also dropped below the 23.6% Fibonacci Retracement point while the Percentage Price Oscillator (PPO) has tilted downwards.
Therefore, the Richemont share price will likely continue falling as sellers target the double-top neckline at $102.95, its lowest swing in October 2023.
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