The surprising way Seiko will survive the watch slump
Jamie WeissI’m not superstitious (nor particularly financially literate, it must be said), but I have a slightly irrational concern that if I keep writing about the watch industry entering a period of decline, I might be inadvertently accelerating that decline… And potentially putting myself out of a job. A self-fulfilling prophecy. But all the signs are there: as Russell related from on the ground at Geneva Watch Days, the watch industry seems headed for a slump, both objectively and subjectively, with overinflated watch prices self-correcting post-COVID, and the Chinese market underperforming.
However, there’s one brand that’s bucking the trend: Seiko. Or rather, the Seiko Group, which is outpacing rival Japanese watchmakers in the stock market this year thanks in part to the company’s “not-so-secret second earnings driver”, as this Nikkei Asia article explains. They report that “in August, the company upgraded its net profit forecast for the year ending March to 11.5 billion yen (US$80 million) – a 14% increase from the year before,” adding that “it is rare for a company to revise full-year forecasts after a single quarter.”
This is fuelled in part due to inbound tourists. A weak yen and an eagerness to travel post-COVID has seen international tourists flock to Japan in an unprecedented tourist boom, with over 35 million people projected to visit the country in 2024 – and Seiko is benefiting, with foreign tourists accounting for around 15% of Seiko’s Japan watch sales in April-June (up from around 10% a year earlier). This has been particularly fuelled by tourists buying Grand Seiko: “Wealthy travellers from the US and Europe are buying Grand Seiko watches,” Seiko Group Executive Vice President Taku Yoneyama explains.
But Seiko’s growth isn’t just thanks to its watch business. The Seiko Group does a lot more than just make watches: the group contains a number of subsidiaries, such as Wako Co. Ltd., which runs luxury department stores including its eponymous location in Ginza serves as the group’s registered office; Seiko Time Systems Inc., which makes outdoor clocks, system clocks, and timing equipment for professional sports; Ohara Inc., which makes specialty optical glass and large telescope mirrors; and Seiko Solutions Inc., its systems segment.
It’s this latter segment (and other parts of the Seiko Group) that are also responsible for boosting Seiko’s bottom line – and that will help Seiko weather a declining watch market. Essentially, through its systems segment, Seiko is involved in a wide range of fields from payment settlement and artificial intelligence to car sharing. Nikkei Asia relates: “As a service business, systems solutions are less vulnerable to economic swings compared with watches and electronic devices. They have become one of Seiko’s core operations amid the company’s push to use its capital more effectively.”
The end result? “Seiko shares have gained 46% year to date, beating the 13% increase in the Nikkei Stock Average. The stock has surged ahead of rivals Citizen Watch, up 11%, and Casio Computer, which suffered a 5% decline,” Nikkei Asia concludes.
Of course, Seiko isn’t the only watchmaker with a diversified income stream. For instance, Rolex famously generates an enormous amount of income from its extensive real estate portfolio. Like Seiko, Omega/Swatch Group is also involved in sports timing through its Swiss Timing subsidiary. And of course, luxury maisons like Cartier make much more than just watches… However, it’s interesting to hear that a company that started off making watches is now getting into AI and car sharing.