Swatch Group First Half Sales and Profits Jump to Record Levels

Swatch Group

Swatch Group’s gross sales for the first half of 2010 exceeded SFr.3 billion for the first time ever, topping the 2008 record, and the future looks bright, thanks largely to China and Russia. The Group’s Chief Executive Nick Hayek told Reuters “We do not see what could keep us from achieving record sales and profit in 2010,” though he added that exchange rates and gold prices present continued risk.

Net income rose 54.5% to SFr.465 million while operating profit rose 81.4% to SFr.626 million. Operating cash flow, at SFr.633 million, was SFr.386 million higher than in the prior-year period (SFr.247 million). Net cash and equivalents rose to SFr.1.33 billion, compared with SFr.1.1 billion at the end of 2009.

Sales increased in the United States and in Europe, excluding Greece. “The U.S. will grow also in the second half, they have to catch up. I also expect strong growth in Western Europe,” Hayek said. He added that the second half, with the holiday shopping season, is generally stronger for the Group.

Focusing on finished watches, gross sales increased 30.6% to SFr.2.572 billion. Swatch Group notes that its sales substantially exceeded the first-half 2010 export statistics reported by the Federation of the Swiss Watch Industry (showing an increase in value of 19.7%), indicating that the Group is gaining significant market share.

The Group’s production segment (movements and components) saw gross sales fall by 5.1% due to reduced demand for watch movements and components by third parties.

Though many analysts view Swatch Group as globally well positioned, the results were nonetheless above market expectations.

The results follow the June death of the Group’s founder, Nicolas Hayek. The half-year report states that within within 48 hours following Mr. Hayek’s death, the board unanimously elected Nayla Hayek as the new Chair of the Board of Directors. The executive positions at Breguet and Jaquet Droz which became vacant were also immediately filled with the appointment of Marc A. Hayek.

Looking forward, Swatch Group says it will continue to expand its retail activities globally in the second half of 2010, for example with the opening of the Breguet boutique on the “Bahnhofstrasse” in Zurich. The group says its major challenge will be to quickly overcome capacity bottlenecks which already exist in some production areas.

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