Swiss watch companies, Swatch Group AG and Watches of Switzerland Group Plc, have recently signaled strong demand for luxury timepieces despite increasing prices. Swatch Group's CEO, Nick Hayek, expects record-breaking revenue this year, driven by robust demand in China and the United States. Watches of Switzerland Group also reported solid demand for luxury watches, even after experiencing price hikes from top brands.
Hayek revealed that demand for lower-priced watches in Asia and the US remains strong, while China is gradually returning to full strength. In fact, the company's first-half earnings exceeded pre-pandemic levels for the first time, indicating a positive trend.
Swiss watch exports have been steadily increasing, reaching over 24 billion francs ($28 billion) in 2022. These reports have allayed concerns about a potential decline in demand for luxury goods in the US, as exports to that market dipped in April. Hayek highlighted the impressive growth across all price segments in Europe and the United States.
Swatch Group's revenue from its own retail network rose to 40% of its total, with average sales per store increasing by 30% worldwide, demonstrating strong consumption globally. The company's operating profit also saw a notable increase of 36% to 686 million francs in the first half, surpassing analysts' expectations.
The growth in demand was particularly strong in the lowest price segment of watches and jewelry, with popular collaborations like the Omega MoonSwatch, priced at around $260, experiencing accelerated demand. Tourist destinations such as Thailand and Macau also benefited from the recovery in travel, contributing to overall sales growth.
However, Swatch Group did face challenges due to the weak US dollar and euro against the Swiss franc, resulting in a 242 million francs decline in first-half revenue. Despite this, management remains optimistic about excellent growth opportunities in the second half of 2023.
Swatch Group and other brands like Omega recently implemented price increases of about 8% in the US. However, Hayek expressed confidence that these price rises would not negatively impact sales, as new product launches are expected to boost demand.
Meanwhile, Watches of Switzerland Group reported sales of £1.54 billion ($2 billion) for the year through April, matching analyst consensus estimates. The company's CEO, Brian Duffy, mentioned that wait lists for high-demand timepieces continue to grow, and average selling prices are increasing, indicating sustained elevated conditions in the luxury watch market.
In conclusion, despite rising prices, the appetite for Swiss timepieces remains strong, with both Swatch Group and Watches of Switzerland Group experiencing solid demand and expecting positive growth in the near future.