SWITZERLAND. Swatch Group, the world’s biggest watch company, posted an impressive +17% rise in first half net profits yesterday, boosted by a strong showing in the luxury sector.
Swatch said first-half net profit rose to SFr217 million (US$171 million) while sales increased +8.8% to SFr1.97 billion (US$1.5 billion) over the first half of 2003.
In recent months, demand for high-end watches has risen, the company said, although it did not break out sales by brand.
“A specific mention should be made of the Breguet brand, which continues to enjoy strong demand,” it added. “However, the other brands in the luxury segment – for instance Blancpain, Glashütte, Jaquet Droz, Léon Hatot, and Omega – are also selling extremely well, meeting the group management’s expectations, and are making their contribution to the company’s growth. Omega’s dynamic growth over the past few years is continuing unabatedly in practically all regions and countries. Rado and Longines are also exhibiting very strong growth.
“In the middle range segment, things have again developed very positively with regard to Tissot and cK – the two best-selling brands – especially in connection with launching the cK jewelry collection. Nevertheless, brands such as Certina and Mido, which cater more to market niches, are also doing well. In the basic market segment, which faces the toughest competition from non-Swiss-made watches, the Swatch brand has held its ground well.”
Swatch said consumer sentiment had “stabilised and improved slightly in Europe, with larger growth being achieved in the US and Asia”.
The company said this month’s Olympic Games in Athens are drawing particular attention to the Swatch brand among an international audience, giving cause for optimism about the second half.
Looking forward the company added: “Group Management and the Board of Directors also remain confident with regard to the second half of the year – even though the strong second half year of 2003 means that the benchmark is a lot higher. In addition, the currency basis presents a greater challenge in the second half of 2003. Provided that the currency situation does not deteriorate significantly and the world is largely spared of exogenous shocks, business can be expected to continue to develop quite positively.”
City reaction was positive. Swatch shares rose sharply on the results, which also lifted fellow luxury stocks such as LVMH and Richemont with strong interests in the watch sector.
“Swatch Group has had a good first half, clearly gaining market share versus the Swiss watch industry,” Scott Weldon of LODH, the private bank, told the Financial Times.
The group’s finished watch revenues jumped by almost +13.7%, outpacing the industry. The Swiss Watchmakers’ Federation last week revealed that the value of watch exports rose +10.2% in the first seven months of this year.
“Swatch has repositioned itself from a maker of mass-market watches into a luxury goods company,” Mario Montagnani, a luxury goods analyst with Bank Julius Baer & Co in Zurich told The Wall Street Journal. “Today, the majority of its profits come from luxury brands and the supply of watch movements and components to rival firms.”
The company is trying to expand sales in key markets such as Hong Kong, Japan and the US by opening more of its own branded stores.
In travel retail the group has forged a powerful presence, covering the whole price spectrum from Swatch plastic watches to top-end Omegas. Omega is particularly hot in Asian travel retail at present, buoyed by its popularity with the new generation of high-spending Chinese travellers.
MORE STORIES ON SWATCH GROUP AND SWATCH GROUP BRANDS
Omega launches the Olympic Collection – 20/07/04
Swatch reaches the edge with new urban designs – 19/07/04
Swatch shows more Olympic spirit – 24/06/04
Stellar performance from Swatch Bijoux – 15/06/04
Tissot showcases new timepieces – 14/06/04
Nestlé watches sales rise with Longines promotion – 16/06/03
Longines launches Avigation in tribute to aviation pioneers – 17/03/03
