PARIS — Business is booming for the Swatch Group and the Swiss company expects it to continue that way after posting a 55.6 percent leap in first-half net income, hitting 498 million Swiss francs, or $576 million at current exchange.
Revenue in the first six months of 2023 totaled 4.02 billion Swiss francs, or $4.65 billion, up 18 percent on the previous year at current exchange rates, and representing an increase of 11.3 percent at current exchange rates.
Net sales exceeded a 2018 half-year record by 8.5 percent, the company noted.
Related Articles
It was a “brilliant” first-half, Bernstein said in a note issued on Thursday, as the Swiss group’s revenues came in well ahead of consensus expectations of 3.92 billion Swiss francs, or $4.53 billion.
You May Also Like
Noting that the group had “so far failed to perform in line with the sector,” senior analyst Luca Solca said that “Swatch Group has improved on many fronts — both in terms of brand support and cost efficiency — and is now an attractive value play.”
By midday trading, Swatch shares had risen nearly 7 percent, and closed at 289.9 Swiss francs, or $337.10 at current exchange rates.
RBC Capital Markets analyst Piral Dadhania said it was “overall a solid print” above consensus from the Swiss group and expected the market to respond favorably. However, the analyst remained “relatively cautious, given consumer headwinds around the rising cost of living and interest rates.”
The Swiss watch and jewelry group attributed the result to strong growth in all its major markets along with the lifting of the last travel restrictions in Asia, notably in China.
This resulted in “clear double-digit” growth in the mainland as well as a run-on effect for tourist destinations such as Thailand and Macau. It even saw “a tripling of sales” in Hong Kong, where business had been steadily declining, it said.
Growth in Europe was led by Switzerland, where sales leapt 50 percent, followed by Italy, Spain and France, while in North America, the lower- and medium-price segments saw “high-double-digit” increases in sales, a performance that “comes as a surprise” for European luxury goods analyst Carole Madjo at Barclays, who said it “contrasts with the weak trends in the region from peers.”
The company said its retail network had seen “outstanding development” with growth rates above 20 percent, and had taken more than 40 percent of total sales for the half-year, particularly at Tissot, which gained “significant market sales” in North America; Harry Winston; Omega; Longines, and the Swatch brand.
It highlighted the acquisition of “prime property” on Old Bond Street in London as well as a store on Paris’ Avenue des Champs-Élysées, where the vacancy rate currently stands at just 7 percent, according to a study by data platform Mytraffic and commercial real estate firm Cushman & Wakefield released Wednesday, as brands hustle to snap up square footage on the street before the city hosts the Summer Olympics in 2024.
With strong demand for product, particularly for Tissot and Swatch, where the success of its MoonSwatch hookup with sister brand Omega remains unabated, raw material procurement remains “a major challenge.”
Despite order books at the end of June being on par with last year, its Electronic Systems division saw the most impact from the weakness of the dollar and euro, according to the company. The segment recorded a 3.3 percent increase over the previous year at constant rates. Its Swiss Timing division, which produces the timekeepers for sporting events, recorded low results due to 2023’s lack of Olympic Games.
For the second half of the year, Swatch said “the only cloud on the horizon” was an unfavorable currency environment. Growth prospects were “excellent” across all regions and price segments, anticipating the introduction of “innovative products” with a particular focus on lower- and mid-range segments.