Swiss luxury watch brand Omega has recently implemented price increases of up to 8%, a move that investment bank Morgan Stanley believes could potentially hinder sales. The price hike includes a 2% increase in Switzerland and China, as well as an 8% increase in the US, which happens to be the largest export market for Swiss timepieces. This surge in prices comes at a time when other watch brands within Swatch Group AG are encountering difficulties in generating revenue, which could have an impact on the sales volumes of Omega, currently the third-largest Swiss watch brand in terms of revenue.

According to analysts from Morgan Stanley, led by Edouard Aubin, the price increase by Omega is an indication of weakness rather than strength. With leading Swatch Group brands like Longines, Tissot, and Breguet facing challenges, it is estimated that the group is becoming increasingly reliant on the cash flow from Omega. In 2022, it was reported that Swatch Group derived around one-third of its sales and approximately 60% of its operating profit from Omega. This places additional pressure on Omega’s sales growth following the implemented price hikes.

In 2021, the US surpassed China as the top export market for Swiss timepieces. However, recent demand indicators have shown signs of weakness, with exports to the US experiencing a decline in April for the first time in over two years, although they did bounce back in May. While watches from Rolex, the largest Swiss watchmaker, are incredibly challenging to purchase at retail due to high demand, Omega watches, with an estimated sales figure of approximately 2.5 billion Swiss francs ($2.8 billion), are comparatively more accessible.

Morgan Stanley analysts suggest that the price increases could have a negative impact on Omega’s sales volumes, especially since the brand is not actively controlling the availability of its best-selling models. Furthermore, back in February, Omega and other Swatch brands, like Longines and Tissot, raised prices in the UK and Europe. Data from WatchCharts reveals that most Omega watches trade below their retail price on the secondary market, while the majority of Rolex models trade at a premium.

In conclusion, Omega’s decision to raise prices could potentially have a detrimental effect on its sales, particularly considering the challenges faced by other watch brands within the Swatch Group. The US market, which is crucial for Swiss timepiece exports, has already displayed signs of weakness. This, combined with the accessibility of Omega watches compared to Rolex, puts pressure on Omega to adapt and maintain its sales growth. Only time will tell how these price increases will ultimately affect the brand.

Helpful links:
Omega Official Website
Swatch Group AG Official Website