Operating income rose 70 percent in the first half to 629 million francs
Swatch Group, the maker of Omega and Tissot timepieces, reported the highest first-half profit in three years, fueled by Asian demand and market share gains across its collection of 18 brands.
Operating profit rose 70 percent to 629 million francs ($628 million), the Biel, Switzerland-based company said in a statement Wednesday. Analysts expected 612 million francs. The stock rose as much as 1.4 percent in early trading.
The results underline the Swiss watch industry’s recovery following a multiyear downturn. Swatch is benefiting from renewed appetite for luxury timepieces in China and Hong Kong. Of late, even the low-end segment, which had been suffering due to competition from the Apple Watch, has been showing signs of a rebound. Swatch had been lowering prices at its Tissot brand to as little as $365 for a Swiss-made automatic watch.
Swatch said all its brands, including middle- and lower-end watches, showed an acceleration in sales, and that the positive trend continued in July. The company forecast strong growth and further market-share gains in the second half.
The comments on July “could be seen as positive for the entire luxury-goods sector as investors continue to fear a potential slowdown in China,” Zuzanna Pusz, an analyst at Berenberg, wrote in a note. “Market share gains suggest a rather limited if not a negative read-across for Richemont.”
Sales rose 13 percent at constant exchange rates to a record 4.27 billion francs. In January, Chief Executive Officer Nick Hayek said the company aimed for high-single-digit sales growth at constant rates this year. Wednesday Hayek said he doesn’t rule out double-digit growth this year.
Inventory levels rose 6 percent to 6.7 billion francs at the end of June, fueled by purchases of gold and diamonds, Swatch said. The recent record high levels of stock-in-trade show “disappointing inventory management,” Morgan Stanley analyst Edouard Aubin wrote.
Swatch said that “a rich inventory level is a prerequisite for healthy growth” and that “in view of the turbulence in global trade with the introduction of punitive tariffs, it is strategically even more important to increase stocks of essential raw materials.”