Swatch Group sales rise in fourth quarter, sparking optimism for 2017

Swatch-Group-headquarters-Biel-Bienne

Swatch Group is calling time on the slump affecting the Swiss watch industry, after reporting “very good growth” in November, December and January, particularly in mainland China.

This revenue growth led to a substantial improvement in operating margin for the final three months of the financial year, and prompted the company to predict a return to growth in 2017.

“Based on the positive development of the last three months, healthy growth is expected for the year 2017,” a statement accompanying Swatch Group’s release of key figures for the 2016 financial year.

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The positive forward-looking statement came at the end of a torrid 12 months for Swatch Group. Net sales declined 10.6% to CHF 7.5 billion.

Operating profit fell 44.5% to CHF 805 million, although operating margin improved by 2 percentage points in the second half of the year, despite massive shortfalls in purchase and order volumes of watch movements and components from third-party customers.

Swatch Group resisted dramatic cost-cutting in 2016; avoiding significant redundancies and maintaining the capacity of its production facilities.

“The Group continues to follow its strategy of preserving the workplace of its employees over the long term, even in a difficult economic environment. This allows the Swatch Group to react quickly and flexibly to the again increasing demand,” the company says.

The UK was the only significant market in the world to grow for Swatch Group. “The Brexit decision of 24 June led to double-digit sales growth in local currency in Great Britain,” the company said. However, profits did not all feed through to the bottom line sales were made in the devalued British pound and purchase prices were in the expensive Swiss franc.

Swatch Group is uniquely placed to calculate how it has performed against the wider Swiss watch industry, because it provides movements and other components to many of its rivals. The group’s component production facilities were left idling as third party brands reacted in panic to decreasing demand by massively reducing orders of watch movements and components, the company said. “The Group‘s own brands could not compensate for this decline,” it added.

In an upbeat forecast for 2017, the group said it expects 60th anniversary of the Omega Speedmaster to provide a strong stimulus.

It also hints that Omega will push online this year, following an experimental etail promotion in 2016.

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