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Swatch Profits Rise 21.4% in First Half

Citing lusty demand for high-end watches, Swatch Group reported a 21.4 percent jump in first-half net income to $222.1 million.

PARIS — Citing lusty demand for high-end watches, Swatch Group reported a 21.4 percent jump in first-half net income to 267 million Swiss francs, or $222.1 million, and voiced confidence for a strong second half.

Reinforcing a bright outlook for hard luxury, the Swiss firm also reported a spike in sales of components and movements to third parties, and rising consumer demand — even in sluggish Europe.

For the first half ended June 30, group gross sales climbed 6.1 percent to 2.08 billion Swiss francs, or $1.73 billion. Excluding the impact of currency, the increase stood at 7.5 percent. Dollar figures have been converted at average exchange rates in the corresponding period.

In a statement, Swatch said it was “very confident” about its prospects for the rest of 2005, mentioning the possibility of “a new record high for group sales.”

Analysts said the numbers were largely in line with expectations, and they cheered what management cited as a clear upward trend in July and August.

In a research note, Goldman Sachs’ Jacques-Franck Dossin said the figures suggest an improved product mix at Omega, now strong in mechanical watches. However, he called “disappointing” a drop in gross margins owing to currency effects, an increase in diamond prices and weakness with the Swatch brand, which is nevertheless slated for further retail expansion.

The firm, whose nameplates also include Breguet, Longines and Rado, said operating profits rose 9.3 percent to 293 million Swiss francs, or $243.7 million.

Led by the upper price category, gross sales of finished watches increased 7.2 percent to 1.55 billion Swiss francs, or $1.29 billion, an 8.9 percent gain at constant exchange.