Finance topics

A return to lavish bonuses for Wall Street’s top earners could be just the tonic that the Swiss watch industry needs this Christmas after months of austerity depressed sales.

The country’s watch sector, which makes up around 7 percent of exports, has been grappling with a sharp drop in demand over the past year after the worst economic crisis in decades killed consumers’ desire and ability to splurge on pricey treats.

But watchmakers are eyeing a modest rise in sales over the key festive period — the fourth quarter accounts for some 30 percent of sales — as a recovery in Wall Street earnings could lift bankers’ bonuses by up to 50 percent.

“The consumer mood between the continents varies, but on average it is better than last year,” said Philippe Merk, chief executive of privately owned Audemars Piguet, whose watches cost around $20,000 to $30,000.

“Luxury consumers, who are bankers, are better off now as this is the sector that has recovered the fastest. These are the indicators that tell us that this year’s Christmas sales will be better,” he said.

Bonuses are expected to be substantially higher this year despite pressure from politicians and regulators to restrain payouts.

Goldman Sachs, for example, has set aside nearly $17 billion for bonuses so far this year and looks well on track to break the $20 billion mark, which could mean higher payouts per employee than in the previous record year, 2007.

This comes after a revival in profits for most investment banks, and contrasts with a bleak year for the financial sector that has seen governments bailing out major banks and nearly 400,000 job cuts.

Richemont’s most important Cartier brand, Swatch Group’s Tissot marque, luxury watchmaker Parmigiani Fleurier and the head of LVMH’s watch and jewelry unit have all said they expect stronger demand this Christmas.

And Tiffany & Co posted better-than-expected quarterly results on Wednesday that showed its upscale shoppers around the world were spending again.

One Swiss banker said he was treating himself to one of Maurice Lacroix’s latest watches this year, adding that some people bought watches and jewelry as a solid investment, especially after this year’s volatile equity markets.

But he cautioned that there would still be many in the financial sector who would have to forego such purchases.

“It will not be as easy as it was in the past. There is a real difference between the winners and the losers. Employees at those banks that are now state-controlled can forget about bonuses this year,” the banker said.

ASIA A BIG FACTOR

Swiss watch exports have tumbled 26 percent so far this year, ending several years of strong growth, but some analysts predict the watch industry will grow 3-4 percent thanks to an easier comparison base next year and thriving demand from Asia. 

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