How China’s reopening fuelled a rebound in Swatch Group sales: the Swiss watchmaker’s first-half earnings exceeded pre-pandemic levels for the first time, while sales in Hong Kong tripled

Jul 14 , 2023

Swatch Group has seen a jump in sales as China’s reopening fuels an optimistic rebound. Photo: Bloomberg

Swatch Group AG shares rallied after the Swiss watchmaker’s first-half earnings exceeded pre-pandemic levels for the first time as China’s reopening fuelled a rebound.

Operating profit advanced 36 per cent to 686 million francs (US$792 million) in the first half, the maker of Omega and Longines watches said Thursday. Analysts expected 604 million francs. The stock rose as much as 6.6 per cent.

Swiss watchmaker Swatch is one of the world’s biggest watch companies. Photo: Reuters

Swatch is one of the luxury goods companies most exposed to the China region, which was the source of a third of its revenue last year. Chief executive officer Nick Hayek told Bloomberg News in January that sales could reach a record this year on the recovery in that market. Optimism about the luxury industry has been tempered by a recent slowdown in the US, which started appearing in Swiss watch exports in April.

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Swatch’s CEO Nick Hayek Jr. Photos: Omega

Revenue reached four billion francs, ahead of analysts’ estimates. 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 jewellery. Demand for the company’s popular Omega MoonSwatch collaboration, priced at around US$260, has accelerated, the company said.

The launch of a new version of the Swatch Group AG MoonSwatch at The Royal Exchange in London, UK, on March 7. Photo: Bloomberg

“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.

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Watches of the Bioceramic MoonSwatch collection by Swiss watchmakers Swatch and Omega. Photo: Reuters

Management sees “excellent” growth opportunities for the second half of 2023. “The only cloud on the horizon remains the unfavourable currency environment,” the company said.

A weak US dollar and euro against the franc shaved 242 million francs from first-half revenue.

Omega recently raised prices by about eight per cent in the US, according to Morgan Stanley.

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Timepieces

Swatch Group AG, which makes Omega and Longines watches, saw its operating profits increase 36 per cent in the first half of 2023, while stocks rose as much as 6.6 per cent
An increased demand for the popular Omega MoonSwatch collaboration has also sparked a renewed interest in watches in the accessible segment, with management seeing ‘excellent’ growth opportunities