Several Swatch Group watch brands are increasing prices by 5-7% in select markets to compensate for the strengthening Swiss franc, the company said on the day it released its 2014 full year financial results.
The eurozone is expected to see the highest price hikes, and British retailers hope this will make them more competitive on price for Swiss brands, but Swatch Group would not elaborate on regional pricing strategies.
Swatch Group shares peaked at CHF 108 in April last year, before declining to CHF 86 by the end of 2014. Analysts attributed some of this softening to increasing competition from smart watches and slowing growth in China.
The decision by the Swiss National Bank to allow the franc to rise in value against the euro saw Swatch Group’s share price fall to CHF 68 last month.
The group’s 2014 trading statement was remarkably upbeat given these headwinds. “The strategically unique positioning of the Swatch Group, with its brands in all segments and a worldwide branch network with its own chains of stores, will allow the Group to generate high single-digit growth in local currency despite the highly overvalued Swiss franc, and at the same time earn continued healthy profits. The Swatch Group will continue to maintain its long-term strategy of investments in innovation, machinery, distribution, as well as in employees, and will also further expand its manufacturing base Switzerland,” the company asserted.
“With its 20 brands, its own production and its worldwide distribution network, the Group is in a very strong position. Marketing investments and selling expenses in foreign currencies, or companies such as Harry Winston in the USA or Rivoli in the Middle East, whose costs are also recorded in local currency, absorb part of the negative effect of the overvalued Swiss franc. In addition, several Group brands are reacting with price adjustments of between 5% and 7% in select markets, which will also compensate for the very unfavourable currency situation,” the company continued.
Total sales for 2014 were up 4.6% to CHF 9.2 billion, but profits fell by 26.6% to CHF 1.4 billion.