Swatch targets double-digit 2013 growth

ZURICH Thu Jan 10, 2013 12:44pm GMT

The logo of Swiss watchmaker Swatch is seen on the door of a Swatch watches shop in Strasbourg March 12, 2009. REUTERS/Vincent Kessler

The logo of Swiss watchmaker Swatch is seen on the door of a Swatch watches shop in Strasbourg March 12, 2009.

Credit: Reuters/Vincent Kessler

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ZURICH (Reuters) - Swatch Group (UHR.VX) aims to keep growing sales faster than the industry average in 2013 and possibly score another double-digit increase, the head of the world's biggest watchmaker told Reuters.

Swatch said on Thursday that 2012 sales growth beat forecasts, helped by affordable - though less profitable - brands that are doing well in contrast to luxury models, which are suffering from cooling demand in important Chinese markets.

"I'm expecting double-digit growth for the Chinese New Year in local currency, and why not perhaps also for the year as a whole," Chief Executive Nick Hayek said in a phone interview.

Gross sales at the maker of colourful Swatch plastic watches as well as high-end Breguet and Omega timepieces rose 14 percent to 8.14 billion Swiss francs last year, beating a forecast for 8.05 billion in a Reuters poll.

Sales at its watches and jewellery segment, which account for 90 percent of the total, rose almost 16 percent, far outpacing an industry average that is thought to have slowed to 5 percent in 2012 from 13 percent in 2011.

Hayek said he expected Swiss watch exports as a whole to grow 5-7 percent in 2013, down from the 12.6 percent growth recorded for the 11 months up to November 2012.

The company noted that high marketing expenses for the London Olympic Games - its biggest brand Omega was a sponsor - and currency developments would affect 2012 profits, due to be reported by February 21. Hayek said net profit would come in above the 1.28 billion francs recorded in 2011.

Swatch shares, which rose 31 percent last year and have performed strongly in recent months in particular on expectations of strong sales, were down 2.5 percent by 1208 GMT, underperforming a 0.7 percent fall on the European personal and household goods index .SXQP.

"The company appears to be tempering expectations regarding this year's (2012) profitability, citing the franc and the Olympics. I suspect the year started OK but no great shakes given its comment about just 'positive growth' so far," Kepler Capital Markets analyst Jon Cox said.

Citi analyst Thomas Chauvet said he expected continued margin pressures for the company as the group invests in its boutiques and production. The fact that high-end and high-margin brands are underperforming the middle segment also weighs on profitability, he noted.

Swatch was the first luxury goods group to report 2012 sales. Peer Richemont (CFR.VX) will post a trading update on January 21. Luxury groups including Burberry (BRBY.L) and PPR's Gucci (PRTP.PA) have recently warned of tough trading in China.

"China is and remains a growth driver. It is not as strong as it was in the prestige high end but our ... Longines, Rado, Tissot and Swatch (brands) continue to grow at a rhythm of around 20 percent. It's from Omega upwards that it gets a little bit less dynamic," Hayek said.

Hayek said an increasing trend for Chinese customers to buy very high-end watches while travelling abroad rather than at home was hitting that price segment in China.

($1 = 0.9271 Swiss franc)

(Additional reporting by Emma Thomasson; Editing by Dan Lalor and Sophie Walker)

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