Swatch Sees H1 Profit Rise 18.5 Percent, and Continued Demand for MoonSwatch
LONDON — Swatch Group remains bullish about its full-year prospects after posting an 18.5 percent uptick in first-half net income to 320 million Swiss francs, or $327 million at current exchange.
Revenue in the first six months was 3.61 billion Swiss francs, or $3.68 billion, up 7.4 percent at constant exchange rates, and 6.5 percent at current ones.
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Shares in the watchmaker were up 1.8 percent at 43.88 Swiss francs, or $44.78, in early-afternoon trading.
The company said that during the first six months strong growth in its Watches & Jewelry division was curbed by lockdowns in China, while the division generated an operating margin of 15.7 percent, compared with last year’s 14.2 percent.
All major markets in Europe, America and the Middle East increased their sales in the double digits, with most of the Asian markets showing “high” rates of growth.
The company said the strongest growth in the period was achieved by the group’s retail stores, with brands ranging from Breguet and Harry Winston to Omega and Swatch performing well.
The group said that due to local lockdowns, it saw “massive” sales declines in mainland China, Hong Kong SAR and Macau in April and May, totaling about 400 million Swiss francs, or $408 million.
As with a slew of other consumer and luxury brands, many retail stores were closed, and no products could be delivered from the central warehouses in Beijing in particular.
By contrast, the conflict in Ukraine had less than a 1 percent impact on group sales, the company said.
Product-wise, Swatch Group described the launch of the Bioceramic MoonSwatch collection as “altogether revolutionary.”
The collaboration between sister brands Swatch and Omega resulted in a product so hot it saw customers camping out in front of Swatch stores worldwide, and resale prices surging online.
Swatch is selling the watch in just 110 of its branded retail stores, and said that demand is increasing daily — and far exceeds available product. It is not available online and Swatch has no intention of selling it through e-commerce channels.
The company said the demand for the Omega x Swatch MoonSwatch, which is priced at $260, “underscores the importance of physical stores.”
Simultaneously, Omega’s Speedmaster Moonwatch has also been in short supply, after a soaring increase in demand from the halo effect of the MoonSwatch, the group said.
In the first half, Swatch said it invested more in marketing than in the previous year: Omega was the timekeeper of the Olympic Winter Games in Beijing earlier this year.
Swatch Group’s production arm also saw an uptick in revenue and margins due to “normalized” order books, post-pandemic.
Despite a large increase in production capacities for the new MoonSwatch, the huge demand from the markets could not yet be completely satisfied, Swatch said.
The company added that it has been seeing “unabated growth” in its Electronic Systems supply division due to the worldwide shortages of electronic components, high-tech products and button cell batteries.
Order books at the end of June 2022 were 40 percent over the previous year, and management said the goal of double-digit sales growth in local currencies for the entire year 2022 “remains realistic.”
Swatch said growth prospects for all price segments, from Swatch to the prestige brands, are “extremely positive.” Regionally, the strongest growth in the second half of the year 2022 is expected in America, Asia and mainland China.
The production companies, and particularly the Electronic Systems segment, will also contribute to the positive development, Swatch said.
In a note issued earlier on Thursday, Barclays said first-half sales were “slightly below” expectations, but that EBIT margin in the core division was above consensus.
RBC Capital Markets said revenue was in line with its expectations while EBIT was 9 percent higher than consensus.
The bank also noted that Swatch might have been a little too optimistic with its full-year outlook “given consumer headwinds around the rising cost of living and interest rates,” which have been soaring on both sides of the Atlantic.
Bernstein said the results were “solid” especially in the context of lockdowns in China producing lower sales in the second quarter and the appreciation of the Swiss franc.
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