Luxury watches boost Swatch Group’s 2004 results

The 2004 sales of the Swatch Group, the world’s largest watchmaker, rose 4.7% to 4.15 billion Swiss francs ($3.49 billion), at current exchange rates, says a report released Thursday. Double-digit sales in upscale and luxury watches helped propel that gain, said the Group, which also noted its production of watches, movements, and components had a “positive rebound.” The outlook for sales in 2005 is “dynamic.”

Watches, its core business showed the strongest gain. Watch sales rose 9.1% in 2004, which the Group calls “above average growth” despite adverse effects of currency exchanges, especially the strong Swiss franc vs. a weak dollar. Those were “particularly noticeable” in 2004’s second half, it says, though the Group continued to “post strong growth in all segments.” In addition, the Group reported higher sales in movements and electronics.

In watch sales, “double-digit growth rates (more than 13%) were achieved in the prestige, luxury, and top market ranges”—representing half of its 19 brands—while other watches reported single-digit growth,” says the Swatch Group. Thanks to targeted efforts in product and marketing, the luxury Breguet brand had an “outstanding performance with strong gains in market share,” says the report. The luxury and upscale brands of Blancpain, Glashütte, Jaquet Droz, Léon Hatot, Omega, Longines, and Rado all “strengthened” their positions, it notes. “Omega, which made the most significant contribution to growth in absolute terms, raised its average prices in many markets and extended its absolute leadership position,” says the Group report.

In the mid-price range, the Tissot and cK brands posted high single-digit growth. In the basic, mass market range, though, growth in the signature Swatch and children’s Flik Flak brands was “more subdued,” because these are “most affected by the strong Swiss franc or weak dollar-linked currencies and price adjustments.” In addition, they have “the strongest exposure to competition from firms producing in China.”

The division that produces watches, watch movement, and components saw “a sharp rebound” in 2004’s second half. While orders from third parties were below 2003, that was “more than offset” by growth in demand from the Group brands. Notable highlights in 2004, says the report, were “advances in the design and production of jewelry for the Breguet, Léon Hatot, Omega, cK and Swatch. Due to marked growth in the high-end collections of the luxury and prestige brands, these activities developed especially strongly.”

The Swiss watchmaker, headquartered in Biel, Switzerland, expects “further solid growth” in 2005.