Omega producer Swatch Group AG and the UK’s biggest retailer of Rolex watches signaled the appetite for Swiss timepieces remains healthy even as prices go higher.
Swatch shares rose as much as 7% as Chief Executive Officer Nick Hayek said revenue may reach a record this year helped by demand in China and the US. Separately, Watches of Switzerland Group Plc surged as much as 18% after the UK retailer said demand for luxury timepieces is still solid despite price increases by some of the biggest brands.
Demand for lower-priced watches in Asia and the US remains strong, Hayek said in an interview. He added that China’s return has yet to reach full strength. First-half earnings exceeded pre-pandemic levels for the first time.
Swiss watch exports have continued to increase in 2023 after reaching a record of more than 24 billion francs ($28 billion) last year. The reports assuaged concern that demand for luxury goods in the US might be waning. Exports to that market dipped in April.
“What is really impressive is the United States as well as Europe across all price segments,” Hayek said.
Average sales per store rose 30% worldwide, boosting the amount of revenue Swatch Group gets from its own retail network to 40% of its total.
“Here you see the strength of the consumption, even in the United States,” the CEO said.
Operating profit advanced 36% to 686 million francs in the first half, the maker of Omega and Longines watches said Thursday. Analysts expected 604 million francs.
Revenue reached 4 billion francs, topping the previous first half record hit in 2018. Sales in Hong Kong tripled while mainland China grew by double digits.
The company said growth was strongest in the lowest price segment of watches and jewelry. Demand for the company’s popular Omega MoonSwatch collaboration, priced at around $260, has accelerated.
Tourist destinations such as Thailand and Macau benefited from a recovery in travel, Swatch Group said. Sales in Switzerland gained 50%, followed by strong growth in markets such as Italy, Spain and France.
One Cloud
A weak US dollar and euro against the franc shaved 242 million francs from first-half revenue.
Management sees “excellent” growth opportunities for the second half of 2023. “The only cloud on the horizon remains the unfavorable currency environment.”
Omega and some other Swatch brands recently raised prices by about 8% in the US, which could offset part of the foreign-exchange impact. Hayek said he didn’t expect the price rise to hurt sales as new product launches will boost demand, he said.
Watches of Switzerland reported sales of £1.54 billion ($2 billion) for the year through April, matching analyst consensus estimates. The company reiterated its full-year forecast for 2024.
Wait lists for the most in-demand timepieces are increasing and average selling prices are growing, CEO Brian Duffy said in an interview.
“Elevated conditions remain and we are adding more people to the waiting lists than we are managing to take off despite us editing down some of the names,” Duffy said.