Swatch Group AG, the producer of Omega timepieces, and Watches of Switzerland Group, the largest UK retailer of Rolex watches, both report continued strong demand for Swiss watches, despite escalating prices. The companies’ bullish announcements have eased concerns about a potential slackening in luxury goods consumption, particularly in the US market.
Swatch’s shares saw a 7% surge after CEO Nick Hayek hinted at a potential record-breaking revenue year, bolstered by robust demand from China and the United States. In parallel, Watches of Switzerland experienced an impressive 18% rise in its share prices as the company asserted a steady demand for luxury watches even in the face of significant price increments.
For the first time since the pandemic, Swatch‘s first-half earnings surpassed pre-Covid-19 levels. CEO Hayek highlighted in an interview the enduring demand for affordable watches in the Asian and American markets, while also acknowledging that China’s economic recovery is still not entirely complete. Swiss watch exports, having set a record at over 24 billion francs (equivalent to roughly US$28 billion) last year, have persisted in their upward trajectory in 2023.
Hayek praised the market resilience in both the US and Europe across all price brackets, noting a global increase of 30% in sales per Swatch store. This surge contributed to lifting the total revenue from the group’s retail network to 40% of its overall earnings. Swatch’s operating profit also leaped by 36% to 686 million francs in the first half, significantly higher than analysts’ prediction of 604 million francs.
The Swiss watchmaker’s revenue soared to 4 billion francs, a new record for the first half of the year, eclipsing the previous record set in 2018. Swatch reported a tripling of sales in Hong Kong and a double-digit growth in mainland China. The most substantial growth was recorded in the lower price segment of watches and jewellery, with the Omega MoonSwatch collaboration, priced at US$260, witnessing accelerated demand.
Swatch’s sales in Switzerland saw a 50% spike, fuelled by an upswing in travel to tourist hotspots like Thailand and Macau. Similarly, substantial growth was noted in markets like Italy, Spain, and France. The company’s report for the first half of 2023 anticipates “excellent” growth opportunities for the year’s second half, albeit highlighting the unfavorable currency environment as a potential concern.
Hayek announced a price hike of approximately 8% for Omega and other Swatch brands in the US, which could offset part of the negative foreign-exchange impact. However, he remains optimistic that the price increase would not dampen sales, particularly given the planned new product launches.
Watches of Switzerland also posted a robust performance with sales amounting to £1.54 billion (US$2 billion) for the year ending April, in line with analysts’ consensus estimates. CEO Brian Duffy noted that wait-lists for the most sought-after timepieces were growing, and average selling prices were also on the rise. Despite a moderate price increase of around 2.5% across Rolex’s UK range earlier in January, Duffy affirmed that the demand remains robust.
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