Swatch Group Enjoys Rebound in Second Half of 2009

Swatch Group

Swatch Group struck a positive tone in its 2009 financial report as results for the second half of the year were much stronger than the first half, when watch sales were down 16.4%. Watch sales finished the year down 5.5% at a constant rate, largely outperforming Swiss Watch Federation export sales figures for the same period. The Group forecasts improved sales and margins in 2010.

Swatch Group sees continuing recovery from the sharp economic downturn that began in late 2008, and the group reported increased market share in nearly all price segments for 2009. The report states in part:

“The last months of 2009 showed a very positive development, with clear signs of market normalization and increased consumer confidence. To some degree, the economic crisis 2009 has separated the wheat from the chaff. This applies especially to the watch industry, where values such as brand awareness, tradition, history and high-quality products count more than ever. Consumers are looking for value and quality. The Swatch Group, with its large range of products in all price segments, increased its market share in most markets and regions.”

Overall Swatch Group gross sales were 5,421 million Swiss francs, the third best year in the Group’s history, and the Group enjoyed its best-ever month in December 2009 as holiday sales rebounded strongly, exceeding expectations. Swatch Group competitor Richemont also reported positive holiday results recently, due primarily to strong sales in the Asia-Pacific region. On January 18, Richemont reported sales of 1.55 billion euros for the final quarter of 2009. Analysts had forecast sales of 1.51 billion euros, based on a median of 17 estimates. At Swatch Group, the fourth quarter 2009 performed in euro terms at +7.1% at actual rates and +11.1% at constant rates. Swatch Group noted that Watches & Jewelry sales actually increased in 2009 by 1.3% over 2007 at constant 2007 rates.

Swatch Group’s Production segment suffered the largest sales decline for the year. Gross sales fell by 17.7% to 1,489 million Swiss francs, with the slowdown hitting hardest in the second half of the year. This is due to the lag between production and sales. Order cancellations led to decreased demand, and in particular orders from third parties (non-Swatch Group companies) for mechanical movements placed in 2009 for 2010 products fell sharply, however Swatch Group believes this trend will change as the market improves. Current order entries picked up in December, which the Group characterized as an “encouraging sign.”

Looking forward to 2010, the report states “A promising trend can be identified, based on the excellent sell-through figures in January 2010 as well as the order entries for the months to come…. Consumer spending is expected to see a steady increase in most countries, with a growing middle class mainly in the emerging markets supporting this trend.” The Group also forecasts increased watch sales driven by its role as official timekeeper at the 2010 Vancouver Winter Olympic games starting February 12.

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