Swatch Group is hit hard but optimistic
The Swatch Group, the world’s largest watchmaking concern, has reported that Sars, sluggish consumer spending and the strength of the Swiss franc hit it hard in the second quarter.
Net profit for the first half fell to SFr186 million ($133.51 million), down 9.7 per cent on the same period last year
Sales at the group, which includes the Breguet, Blancpain, Omega, Longines and Swatch brands, fell by 6.6 per cent to SFr1.82 billion.
However, the group said in a statement from its headquarters in Biel that it was optimistic for the second half of 2003 due to “positive developments” in July.
Positive trend
Recent reports from the group’s own retail stores and other jewellers confirmed a “positive trend” in August, based on increasing visitor numbers and sales, the statement added.
“The second half is always stronger than the first and the first half was not very strong,” chief executive Nicolas Hayek junior told Reuters news agency.
“July and August gives us positive signals so I think from there on, if there is not a big increase in Swiss franc strength, then we should really be able to improve the situation,” he added.
In its commentary on the business development, the Swatch Group said that it had achieved a good start to the year, with the operating result slightly higher than in the same period last year.
But the April – June period was “sharply hit” by Sars, the decline in travel, the war in Iraq and the general weakening of consumer spending.
Swatch reported further organic growth of the prestige and luxury market segment, including “impressive” strong gains at Breguet.
But Rado registered declining sales in German-speaking regions and other important markets.
Drop in tourism
The Swatch brand was hit in May and June by a drop in tourism and negative monetary influences. This was apparent at major airports and also Swatch shops in Milan, Paris and New York.
In their outlook, the board of directors and management said they were confident that the group had strengthened its leading position in the watch market, even under difficult conditions, and would extend this position in the second half.
Shares in Swatch have risen by almost ten per cent this year and have performed better than at rival Richemont, which includes the Cartier, IWC, Piaget and Vacheron Constantin brands.
Under investigation
On Monday, the Swiss stock exchange said it had started a preliminary investigation into the Swatch Group regarding a potential breach of information-disclosure rules.
It follows an interview in a Swiss weekly in which Hayek junior had said that the firm’s sales dropped sharply in May and June.
The interview was published two weeks before the company’s half-year presentation, falling into the period during which the company is not permitted to comment on operational performance.
swissinfo with agencies
The Swatch Group is the largest watchmaking concern in the world.
The total value of all Swiss watch exports for the first half was SFr4.6 billion, 6.6 per cent or SFr322.6 million down on the same period last year.
First-half profit at the Swatch Group has fallen by 9.7 per cent to SFr186 million.
Gross sales were 6.6 per cent down at SFr1.816 billion.
The company said it was hit hard in the second quarter by Sars, sluggish consumer spending and the strength of the Swiss franc.
It experienced a negative currency impact of SFr102 million.
But the Swatch Group has issued an optimistic outlook for the second half of the year.
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