Swatch sees rebound in US, Europe as watch sales improve

[ZURICH] Swatch Group AG, the largest maker of Swiss watches, forecast a rebound in US and European markets as well as higher demand for components sold to rival watchmakers, a further signal the industry's longest slump on record may be ending.

The first months of 2017 have been "encouraging", the Biel-based company said in its annual report Thursday. Swatch fleshed out its forecast for "healthy growth" in local currencies this year, saying it applies to the US and European markets as well as total sales, and that Asian and Mideast markets have particularly improved.

Switzerland's exports of timepieces have dropped for 19 months, the longest downturn on record, and Swatch's operating profit slumped 45 per cent last year.

Still, chief executive officer Nick Hayek has repeatedly said the industry is not in a crisis. Swatch also said Thursday it expects improvement at its unit that sells watch components to rivals, a positive sign for the entire industry, as Bank Vontobel analyst Rene Weber estimates that revenue from selling such mechanisms fell 50 per cent last year.

"We expect first signs of a return to positive Swiss watch exports trends to come in March," said John Guy, an analyst at MainFirst Bank.

"That will be driven by stronger consumption in greater China, where Swatch has the highest regional exposure, and a normalization of luxury sales related to travel in Paris."

Mr Hayek's total pay was cut 12 per cent to 6.1 million francs (S$8.632 million) last year, according to the annual report.

The stock rose as much as one per cent in Zurich. Short interest in the stock has dropped to 14.9 per cent of the company's shares, the lowest amount in almost two years, according to Markit Securities data.

Chairwoman Nayla Hayek said the company has refused to "adhere to an 'end of the world' mentality", and is committed to maintain jobs even amid downturns.

Swatch's sales will probably rise 7 per cent to 10 per cent in local currencies in 2017, Mr Hayek said in an interview last month.

BLOOMBERG