Tag Heuer latest Swiss brand to adjust prices in face of currency fluctuations
Tag Heuer, French luxury group LVMH's biggest watch maker, plans to freeze prices in some markets and cut them elsewhere in a move to balance out the impact of the recent jump in the Swiss franc and the euro's weakness.
Several luxury goods makers, including watch makers such as Richemont's Cartier as well as privately owned Patek Philippe and fashion house Chanel, have resorted to similar measures to erase major price discrepancies between markets resulting from currency fluctuations.
Tag Heuer said prices would drop an average 8 per cent in Switzerland, China, the United States, the Caribbean, and Central and South America, 7 per cent in Britain and 13 per cent in Hong Kong, but it would not raise prices in the euro zone, Japan and Singapore.
"Tag Heuer is seizing the opportunity of the recent appreciation of the Swiss franc to rebalance its international price policy," it said in a statement.
Brands are concerned that price differences, which can be more than 30 per cent between some Asian and European markets, encourage parallel trading, when luxury goods are sold outside approved retail networks.
Several analysts said that the round of price cuts could have snowballing effects, prompting rivals in the same price and product category to make similar moves.
"The penalty, if not, would be of potentially losing market share," said Exane BNP Paribas analyst Luca Solca. "The consequence of more widespread price cuts in China, obviously, would be that part of the foreign exchange benefit from a weaker euro would disappear from the bottom line."
Patek Philippe said price differences, which could be 20-25 per cent in Asia and the US compared to Switzerland and the euro zone, enticed customers to buy their watches abroad.
"Parallel trading is one of the biggest problems we have to deal with," Patek Philippe chairman Thierry Stern said.
This month, Patek cut prices by as much as 14 per cent in China, 10 per cent in the US and 7 per cent in the euro zone.
Chanel, which on Tuesday announced price cuts of more than 20 per cent in China and increases of about 20 per cent in Europe, said the gray market also hurt the brand's image.
