Omega, Rolex watch demand booms as Swatch sees possible record
OMEGA producer Swatch Group and the UK’s biggest retailer of Rolex watches signalled the appetite for Swiss timepieces remains healthy even as prices go higher.
Swatch shares rose as much as 6.9 per cent 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 shares gained as much as 12 per cent after the UK timepiece seller said demand for luxury timepieces is still solid despite price increases by some of the biggest brands.
Demand for lower-priced timepieces 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 Swiss francs (S$36.9 billion) last year. The reports assuaged concern that demand for luxury goods in the US might be waning. Swiss watch exports to that market dipped in April.
“What is really impressive is the US as well as Europe across all price segments,” Hayek said.
Average sales per store rose 30 per cent worldwide, boosting the amount of revenue Swatch Group gets from its own retail network to 40 per cent of its total.
“Here you see the strength of the consumption, even in the US,” the CEO said.
Operating profit advanced 36 per cent 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 US$260, has accelerated.
“We highlight the ongoing success of the MoonSwatch and a renewed interest in watches in the accessible segment, most notably in the US,” wrote Jean-Philippe Bertschy, an analyst at Vontobel. He also said total revenue outperformed Switzerland’s watch exports for the first time in years.
Tourist destinations such as Thailand and Macao benefited from a recovery in travel, Swatch Group said. Sales in Switzerland gained 50 per cent, followed by strong growth in markets such as Italy, Spain and France.
Management sees “excellent” growth opportunities for the second half of 2023. “The only cloud on the horizon remains the unfavourable currency environment.”
A weak US dollar and euro against the franc shaved 242 million francs from first-half revenue.
Omega and some other Swatch brands recently raised prices by about 8 per cent in the US. 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 (S$2.7 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, chief executive officer Brian Duffy said in a statement announcing full-year results. BLOOMBERG
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