Swatch says watch brands to raise prices in Europe up to 10%

[ZURICH] Swatch Group AG, Switzerland's biggest watchmaker, will raise prices at some of its brands by as much as 10 per cent after the Swiss National Bank's surprise decision last week to abandon the cap on the franc exchange rate.

"We will adjust prices in Europe for some brands between 5 to 7 per cent, to 10 per cent," Chief Executive Officer Nick Hayek said by phone.

Swatch's highest-end brands, Breguet and Blancpain, will be among those raising prices, along with Omega and Longines, which are more mid-range. The executive said he will be "more reluctant" to raise prices for Swatch and Tissot, which sell models at lower prices.

The franc has gained 19 per cent against the euro since the end of last year, surging after the central bank scrapped the three-year-old policy on Jan 15. That will force watchmakers to raise prices or face lower profitability, Jean-Claude Biver, head of LVMH Moet Hennessy Louis Vuitton SA's timepiece brands, has said.

Biel-based Swatch, which gets about a third of its sales from Europe, will be able to compensate for some of the gain in the franc because the strength of the currency reduces certain costs in retail operations and marketing, Mr Hayek said.

The watchmaker's recent acquisitions of Rivoli, a Dubai-based watch retailer, and Harry Winston, the US diamond jewelry brand, also help, as they are less exposed to the franc, he said.

"However, overall, there might still be a certain negative effect to our sales that I can't specify at the moment," Mr Hayek said. Swiss prices will probably remain the same, he said, though the company will continue to monitor the situation.

Swatch's shares fell one per cent to 359.70 francs at 4:10 pm, and are down 21 per cent since the day before the SNB U-turn.

Separately, Cie Financiere Richemont SA, the owner of the Cartier brand, is considering increasing prices in Europe by 5 per cent to 7 per cent, said a company official, who asked not to be identified discussing internal matters.

BLOOMBERG