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Sales ticking along better for Swiss watchmaker Swatch

ZURICH • Higher sales clocked in the first half of the year could have prompted Omega maker Swatch to shock the watch industry recently when it called time on its participation in Baselworld.

The Swatch Group is pulling out of the annual watch and jewellery trade fair, an event that has been celebrated in the luxury industry calendar for a century.

Swatch, the most important exhibitor at Baselworld, joins other brands such as Girard-Perregaux and Ulysse Nardin that are ticking off the fair – held every year in March – from their marketing calendar, citing high costs and insufficient returns.

Only 650 exhibitors showed up at Baselworld 2018, a 50 per cent decline from the year before. A decade ago, there were 2,087 exhibitors.

The pressure on marketing has also been reduced as Swiss watchmakers have seen sales and margins recover this year after a prolonged downturn caused by a meltdown in Chinese demand.

Swatch Group said it expected strong demand in Asia and America to keep fuelling sales growth this year after first-half net profit bounced back from weak year-ago levels.

The company, which took fewer cost-cutting measures to protect margins than peer Richemont, was hit harder during the lean years, and is now poised for a stronger recovery.

“The month of July continues the very positive trend.

“The second half of the year offers excellent opportunities for continued strong growth and further expansion of market share,” said the world’s biggest watchmaker whose products range from the expensive Breguet to more affordable Longines and plastic Swatch timepieces.

Sales rose 12.6 per cent to 4.266 billion Swiss francs (S$5.83 billion), driven by “very high growth rates” in Asia and a “double-digit sales increase” in North America, while expansion in Europe was more variable.

But analysts pointed to more challenging conditions in the second half, such as trade tensions that could raise tariffs, and said they expected growth to clock in at a lower pace.

Stirring the next generation’s interest in mechanical watches that work without a battery is key to the future of the Swiss watch industry as omnipresent mobile phones tell the time more accurately than any mechanical watch.

“Consumers want real values not only materially but also emotionally,” said the Swatch Group, as its flamboyant chief executive Nick Hayek sought to explain why Swiss watches would keep their appeal in a world “where everything is interchangeable and quickly loses its value”.

The company also highlighted the increasing interest in preowned products, a recent trend in the industry, but did not say whether it would actively enter the category as some peers have done.

Richemont in May reported disappointing annual results, notably due to inventory buybacks of unsold watches, but also mentioned the recovery in Hong Kong, the biggest export market for Swiss watches.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 10, 2018, with the headline 'Sales ticking along better for Swiss watchmaker Swatch'. Print Edition | Subscribe