Subprime Reporting? The Morgan Stanley/Swatch Group Controversy

Morgan Stanley Investment Management published its Ninth Annual Swiss Watcher on February 19th. The report dives deep into the commercial performance of the Swiss watch market on a brand-by-brand level. I assume very few watch enthusiasts read the whole thing, but one table is rather famous: the top 50 Swiss watch brands ranked by turnover. Watch lovers all over the globe pore over the ranking: Which brand is up? Which is down? Who overtook whom? In a sense, the yearly publication became a public scoreboard for the Swiss watch world’s biggest players.

While we hear murmurs from the industry about the report every year, this year is different. For the first time, a major player — the Swatch Group — responded in an open letter published in the group’s online investor space on February 27th. The Swatch Group criticizes Morgan Stanley’s methodology and conclusions. This is a reason for us to have a closer look at what went down and how it affects us, watch enthusiasts.

What is the Morgan Stanley Investment Management Annual Swiss Watcher?

The Annual Swiss Watcher is, simply put, a market analysis of, you guessed it, the market for Swiss watches. The report is partly based on openly available data. After all, the law requires publicly traded companies to publish their figures.

However, not all watch brands are publicly traded companies. Similarly, the major groups that are don’t need to publish the figures of the individual brands that comprise the group. This means Morgan Stanley cannot simply rely on a single clean, consistent dataset covering all brands. In fact, even imperfect, inconsistent data is hard to come by or even unavailable for specific brands and metrics. Because of this, the bank collaborates with the Swiss consultancy firm LuxeConsult to fill in the blanks. More on this later.

Crucially, the report isn’t publicly available. Morgan Stanley doesn’t openly publish it, nor is it intended for the (watch) media. The report is simply aimed at Morgan Stanley Investment Management’s customers, who are investors.

Why the Swatch Group feels wronged

Okay, so far so good. However, the Swatch Group wasn’t too amused upon reading this year’s Annual Swiss Watcher. One of the key takeaways in the report is that Swatch Group brands lost ground to competitors. In fact, the second bullet point of the report’s management summary states, “Omega fell two positions to #5 by turnover.” The seventh bullet point reads, “Swatch Group: Structural Headwinds Persist. Swatch Group was once again the industry’s main market share donor.”

It is no secret that the watch industry is facing hard times and that this downturn is hitting the Swatch Group particularly hard. The group reports an 89% fall in net profit in its 2025 annual report, so no secrets or surprises there. However, Morgan Stanley’s report delves quite a lot deeper, going into detail about individual brands to an extent that the group deems unwarranted.

In fact, Swatch Group phrases it as follows: “The research includes statements about sales development and profits of our companies that could seriously undermine customer and retailer trust. Some of these wrong statements are so severe that, in addition to communication measures, legal action should be considered.”

What are the Swatch Group’s issues with Morgan Stanley’s report?

I will not reiterate the Swatch Group’s entire letter (you can read it here if you want). It is worth looking at some examples of its criticism, though. The first point is that there is no reliable data on which to base the report. As stated above, many of the figures discussed aren’t publicly available. A prime example: while the Swatch Group publishes group figures, it doesn’t report on its individual brands. Simply put, there is no reliable way of telling how much of the turnover comes from Omega and how much comes from Longines or Hamilton. Similarly, some other companies in the report don’t publish numbers at all.

This results in faulty findings on multiple levels, according to the Swatch Group. Apparently, the report misrepresents the group’s brands’ individual turnovers within a range of -53% to +46%, averaging 24%. Similarly, the report states that Hamilton watches cost, CHF 2,014 on average, while the Swatch Group says it is CHF 714, just to give you a striking example.

The group’s letter continues to describe how this poor availability of data is masked by apparent precision in the report. For instance, percentages are reported with decimal-point resolution, whereas the Swatch Group states they could, at best, be estimated in broad ranges. While Morgan Stanley does make some disclaimers, the report doesn’t sufficiently specify the difference between known and estimated data points, according to the Swatch Group.

So, how does Morgan Stanley source this data?

If the available data is limited, how does Morgan Stanley come to such detailed analyses? This is where it gets complicated. I am the first to admit this falls outside my usual field of expertise, so let me stick to the easy-to-understand broad strokes.

The available data is supplemented with insights from different sources, such as public statements by CEOs, export data from the FHS (Fédération de l’Industrie Horlogère Suisse), and known numbers of points of sale and retail networks.

These insights are used to calculate and estimate figures like the wholesale share versus retail share of sales, market shares, numbers of units sold, and more. Morgan Stanley relies on industry insider Oliver Müller of LuxeConsult for the accumulation and analysis of these data points and insights.

Why is this controversial?

As you can see, the report relies on a patchwork of hard data filled in with estimations and educated assumptions. While the report openly states that many of its insights are based on estimations, the resulting conclusions are indeed surprisingly precise and confidently presented. I have no way of checking the Swatch Group’s counterdata, but if it’s true, I understand the company’s grievance. Morgan Stanley corrected its data before based on a watch brand’s feedback. Let’s see how the investment bank processes the Swatch Group’s input. You could argue in favor of Morgan Stanley that all brands are free to publish their figures proactively. Then again, the more cynical perception is that Morgan Stanley forces them to do so by publishing information that is likely false to begin with.

As the Swatch Group states, “Creating a ranking based on such figures, as the research does, is crude and negligent. If even brands of a publicly traded company like Swatch Group — whose global data is publicly available — show discrepancies of 50% and more, the deviations for privately owned brands (which do not publish any brand-specific data at all) are likely even bigger. Even the average deviation of 24% for Swatch Group would significantly reshuffle the ranking of top brands. Omega, for example, could rank anywhere from second to sixth, instead of listed as fifth. The research’s claim that ‘Omega fell two positions to #5 by turnover, overtaken by Audemars Piguet and Patek Philippe’ (page 3) is therefore meaningless. It could just as easily mean that Omega has overtaken Cartier and is now in second place.”

The watch media have some introspection to do

Although I am in no position to properly fact-check either party, I can respect the Swatch Group’s sensitivity. After all, this document is intended as investment advice. Reading the report, I have to agree that the conclusions seem rather strong considering all the uncertainties in the data. It makes more sense to present estimated ranges rather than exact figures if so much of your underlying data is subject to interpretation and estimation. Then again, while I have personal experience with scientific publications — and this would not pass — I am less well-versed in the rules of engagement for investment reports like this. Seasoned investors, feel free to share your thoughts in the comments section below.

Here’s the thing: as stated before, this report is aimed at Morgan Stanley Investment Management’s clients. It is supposed to help them evaluate investment potential. It is up to those investors to properly weigh the report’s value and adjust their confidence accordingly. I reckon the more skillful investors will see through the flaws quite easily. Honestly, if I can spot weaknesses (and I do), any investor worthy of the title surely can too.

The problem is that the watch world seizes the report and uses it as a scorecard. The ranking emerges on Instagram accounts typically limited to #wristcheck and #womw posts. I have to admit guilt myself, as I don’t dare stick my hand in the fire to promise I never quoted from earlier versions of the report on Fratello in the past. I think the current controversy should trigger some introspection on our part. The watch media shouldn’t just run with findings like these. But the uncomfortable truth is that it is not realistic (or sometimes even possible) to fact-check the plethora of press releases and reports published on a daily basis. In the end, all we can do is remain open and transparent when developments like this occur.

Closing thoughts on the Morgan Stanley report

It is interesting to read the Swatch Group’s response to the Morgan Stanley Annual Swiss Watcher report. I can only imagine there must have been some fiery internal discussions before doing so. After all, you run a serious risk of coming across as sore losers if you are indeed struggling, as the group undeniably is.

Still, I do applaud the Swatch Group for going into such detail. The letter reads like a well-considered critique of the report’s methodology and conclusions. Even if we cannot fact-check the numbers provided by either party, the discourse highlights some significant methodological defects in the research that perhaps aren’t sufficiently explained by Morgan Stanley. Even without questioning Mr. Müller’s expertise and interests, it seems like a lot of weight to put on one expert. At the time of writing, no formal response has come from the investment bank.

What do you think of the Swatch Group’s criticism of the Morgan Stanley report? Let us know in the comments section below!