Swatch CEO Says Sales Growth Will Accelerate Through Year-EndBy
Strong euro to boost profitability as co. maintains prices
Shares erase drop as CEO repeats internal goal for 2017 sales
Swatch Group AG Chief Executive Officer Nick Hayek forecast sales growth to accelerate through the rest of the year as wholesalers stock up on watches and local demand for timepieces improves in markets from China to Switzerland and France.
A stronger euro also should boost profitability at the maker of Omega and Breguet timepieces, Hayek said Friday in a telephone interview.
“We’ve seen the acceleration in July already, in August it got stronger and September looks like August: very positive,” the CEO said. The stock rose as much as 2 percent, erasing an earlier decline.
As the Swiss watch industry rebounds from the longest slump since the quartz crisis, wholesalers are no longer holding back on orders to stock up again, the CEO said. There’s also a “much healthier” mix between tourists and local buyers now in markets from China to Switzerland and France.
Swatch’s higher-priced brands, starting from Omega, had sales growth of 10 percent in the five months through August, in euro terms and constant rates, Hayek said. Jewelry sales gained almost 20 percent. Still, lower-end brands such as Swatch and Tissot had slower growth, with increases of 2 percent to 3 percent, he said.
Richemont, the owner of rival brands Cartier and Vacheron Constantin, this week reported a 7 percent increase in sales in the five months through August on a constant-currency basis that excluded exceptional inventory buybacks.
Swatch has set an “ambitious” internal objective for 7 percent to 9 percent sales growth this year, excluding currency shifts, Hayek said. He said it’s “not a forecast” or “guidance.”
“Let’s fight to get this growth,” he said. “The opportunities are clearly bigger than the risks. It will be a challenging fight and who knows, perhaps, even the exchange rates for once could help us.”
Rene Weber, an analyst at Bank Vontobel, said the company probably will achieve full-year growth of about 3 percent or a bit higher, as the increase in the first half was 1.2 percent.
Swatch shares have recovered from a 3.9 percent decline on Wednesday fueled by concern that Apple Inc.’s third-generation smartwatch may increase competition in the lower-priced segment. Swatch has been adding electronic features to its namesake watches, such as mobile payments, and it’s developing its own operating system for a smartwatch planned for around the end of 2018.
“I just wonder if one day there is some cannibalization between the Apple Watch and the iPhone,” Hayek said.