Despite Rising Franc, Swatch Group Predicts Record Year

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Bienne, Switzerland–Swatch Group, the world’s largest watchmaker, expects another record year in 2011 as returning demand for its timepieces and price increases may help it hit $6.7 billion in sales.

Swatch Group reported Wednesday that it has already seen double-digit sales growth so far this year in local currencies. Swatch said gross sales rose 18.8% to 6.44 billion Swiss francs (about $6.72 billion). While the full year report will be released on Feb. 24, the full year figures will undoubtedly be influenced by the rise of the Swiss franc, perhaps reducing sales by 164 million Swiss francs, or 3%. “The record figures expected in absolute terms will be attenuated by the extremely strong Swiss franc,” the company said.

Swiss Franc Fluctuations May Affect Totals

Nonetheless, Nick Hayek, ceo, told Reuters that “because of the Swiss franc we cannot tell you if it will be a double-digit growth throughout the whole year in Swiss francs also or if it will be a single-digit growth, but there will be growth.”

“After a strong month of December with 21% growth at constant rates in the segment watches and jewelry, there are already indications in January 2011 of continued double-digit growth. Outlook remains optimistic in the entire year 2011 for further strong organic sales growth,” the group said.

Strong demand for watches returned after 2009 reduced sales which hit luxurygoods especially hard. Demand increased in European countries, such as France, Germany, Britain and Switzerland as well as in the United States, where the group’s Swatch and Omega brands had proven particularly popular, Hayek said. But China’s appetite for high end watches has helped boost figures more than anything else.

“The group’s top-line growth has again exceeded our expectations, and even more so, market consensus,” Helvea analyst Alessandro Migliorini said. “The group continues to grow at an excellent pace, and although currencies are a headache, they do not represent an insurmountable problem.”

Price Increases This Year

Hayek also added the company, which also owns high-end brands such as Breguet, Blancpain and Omega, will increase prices and improve its manufacturing processes to combat the strong franc and higher gold prices.

“We will certainly adapt prices for certain brands. We have to do it,” Hayek said, adding there’s less resistance to price increases in the more expensive price categories. Price increases will likely go into effect first in Europe and the United States, starting with the brands in the price ranges from Longines upwards, Hayek said.

Swatch Group’s announcement coincides with Hayek’s calls Wednesday for the Swiss National Bank to introduce a fair target level for the Swiss franc and defend it to deter the speculators that Swatch and other Swiss companies blame for sending the currency soaring against the euro and dollar.

“The Swiss government and the Swiss National Bank need to introduce a clear fair level of the Swiss franc,” Hayek said. “Without this, speculation will rise, and hurt the economy and tourism.”

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