Swatch clocks up 14% sales surge

Swatch Group shrugged off concerns about slowing Asian demand for luxury goods, reporting that its sales rose 14 per cent in 2012, following what was already a record year in 2011.

Swiss watch exports, which have been on a sustained surge thanks to soaring demand from Asia’s growing ranks of nouveau riche customers, suffered their first monthly fall in three years last September, and the slowdown in Asian sales persisted in October and November.

However, Switzerland’s largest watchmaker, which derived more than half its revenues from Asia in 2011, said that its total sales breached the SFr8bn ($8.7bn) mark for the first time in 2012, beating analysts’ expectations and coming in at SFr8.14bn, thanks to “convincing” performances by all its brands in all regions and price segments.

“Overall sales growth was better than expected, driven by their watches division, so it looks like Christmas must have been pretty good – or retailers were buying in anticipation of a good Christmas,” said Jon Cox, head of Swiss research at Kepler Capital Markets.

Swatch’s growth was powered by its watches and jewellery division, where sales grew 15.6 per cent to SFr7.3bn, while its production division grew 10.1 per cent. Revenues at the small electronic systems division declined 7.4 per cent.

Despite the strong top-line growth, Swatch said merely that operating profit and net income for 2012 would be “good”, once “the significant marketing expenses for the Olympic Games in London and unsatisfactory currency developments” were taken into account.

“They are trying to stop people getting too excited about their profitability. Without doubt, in an Olympic year their marketing costs rise significantly. I imagine they spend SFr50m extra just around this one event,” said Mr Cox.

“Clearly the currency markets haven’t helped either. They are pegged against the euro, but the dollar has been weak, and over half their sales go into what are effectively dollar-denominated markets, when you consider that the renminbi and HK dollar are effectively pegged to the US dollar,” he said.

Swatch said that its brands had reported a “good start” to the new year, and that “healthy growth is again expected in 2013”. However, most analysts expected that 2013 will be a slower year for luxury companies than 2012.

“Unlike last year, management did not suggest that the critical month of December was particularly strong and the current January trading comments do not suggest that our 7 per cent sales growth forecast for 2013 is too conservative,” said Thomas Chauvet, an analyst at Citi.

Swatch is due to announce detailed full-year results in February.

Shares in the company were down 2.38 per cent at SFr83.95 in morning trading in Zürich.