PLAN-LES-OUATES, Switzerland — Volatile currencies threaten to dampen the performance of the Swiss watch industry in 2014.
This story first appeared in the March 21, 2014 issue of WWD. Subscribe Today.
Swatch Group chief executive officer Nick Hayek said Thursday that foreign exchange variations could dent the group’s revenues by up to 500 million Swiss francs, or $570 million at current exchange, this year.
The world’s biggest watchmaker, whose brands range from affordable Swatch watches to high-end Blancpain timepieces, registered a negative currency impact of 50 million Swiss francs, or $55.8 million, in February alone, he revealed.
“So if this situation remains as it is today — I would not even like to think it gets worse, but it could get worse, but we are all not pessimistic people — then you calculate yourself, the impact will be between 400 million to 500 million Swiss francs easily for the total year,” he said at the group’s annual media conference, held at the Harry Winston watchmaking facility here on the outskirts of Geneva.
As a result, Hayek declined to forecast full-year sales growth for the Swatch Group, which posted gross sales of 8.8 billion Swiss francs, or $9.58 billion, in 2013, up 8.3 percent from 2012.
This included a negative currency effect of 66 million Swiss francs, or $71.2 million. All dollar rates are calculated at average exchange rates for the period concerned.
Hayek predicted the Swiss watch industry as a whole would grow by 5 to 10 percent in 2014.
His comments came as the Federation of the Swiss Watch Industry reported Swiss watch exports rose 7 percent in February.
“The opportunities are here because we have local consumption everywhere in the world that is growing, local consumption in the U.S., in Japan, in the Middle East, in Russia, also in Mainland China. However, if you translate this in growth in Swiss francs for a company like ours that is producing 90 percent of everything here in Switzerland, it looks differently,” he said.
“We will fight for it, but we have always been somebody who is developing long term. We won’t just go and increase price and lose market share or take the risk to lose market share,” the executive added.
Hayek said Swatch Group plans to continue expanding its retail network after last November taking control of Rivoli Investments LLC, a Dubai-based company that operates more than 360 stores in the Middle East.
Directly controlled stores, including the Rivoli units, accounted for 20 percent of total turnover at the end of 2013 and the group aims to increase this proportion to between 30 percent and 35 percent, Hayek said.
He confirmed he had been approached by technology firms including Google regarding a smartwatch collaboration, but added that Swatch Group was in no rush to enter the category, following the failure of Swatch’s Paparazzi watch, launched in 2004 with MSN Direct, a division of Microsoft. The watch promised wearers personalized information including news, sports, weather and stock quotes via the MSN Direct service, but failed to catch on.
“We have the technology and the know-how in-house so, of course, we are always getting visits from all those companies,” said Hayek. “We are not looking to do a collaboration with another U.S. company and we don’t need to. We are pioneers.”
He added that Swatch Group already provides the technology behind one of the world’s leading fitness bands, one of the hottest categories in wearable technology.
“The whole display, plus chip and everything, is from us. We deliver to this American company. It’s only to say, so sometimes you have something already on the wrists of some people that’s coming from us,” he said.