PARIS — Signaling more good times ahead for the luxury watch and jewelry sector, Swatch Group AG said 2006 net profits jumped 33.7 percent to 830 million Swiss francs, or $684.9 million, from 621 million Swiss francs, or $512.5 million, and added that 2007 is off to an “excellent start” with “outstanding prospects.”
The world’s largest watchmaker also cited additional growth potential for its watch and jewelry brands in all geographic regions, sending a bullish message ahead of next month’s Baselworld 2007, where it plans to unveil a new “co-axial” movement for Omega.
Operating profits rose 32.4 percent to 973 million Swiss francs, or $803 million, from 735 million Swiss francs, or $606.6 million, a year ago. Dollar figures are at the current exchange rate.
Full-year sales, reported in January, grew 12.3 percent to 5.05 billion Swiss francs, or $4.17 billion, from 4.5 billion Swiss francs, or $3.71 billion. Swatch cited strong growth in its production division, but more modest results with electronic systems.
Sales of watches and jewelry last year grew the fastest, up 13.8 percent to 3.72 billion Swiss francs, or $3.07 billion, from 3.27 billion Swiss francs, or $2.67 billion a year earlier.
The company cited growth across all brands and price ranges, including the jewelry sector. Its stable includes Breguet, Blancpain, Leon Hatot, Longines, Rado, Tissot and Hamilton.
Operating profits in watches and jewelry leaped 17.9 percent to 738 million Swiss francs, or $609.1 million, from 626 million Swiss francs, or $516.7 million, a year ago, despite a negative currency effect, additional marketing expenses in the U.S., higher gold prices and a new luxury tax in China.
On the production side, the company highlighted a product mix skewed to higher-end movements and components, meaning “a further rise in profitability in this segment is well within the realm of possibility.”
Looking ahead, the Swiss conglomerate said the currency situation is favorable, excepting the weak yen, with a strong euro more than compensating for a weak U.S. dollar. Encouraged by strong trading in January and February, it is forecasting further sales growth and a rise in profitability for the current year.
This story first appeared in the March 20, 2007 issue of WWD. Subscribe Today.
In tandem with the results Monday, Swatch announced a new share buyback program valued at 400 million Swiss francs, or about $330.1 million, plus a 40 percent increase in its annual dividend to 3.50 Swiss francs per share, or $2.88.
Analysts applauded the numbers, which beat consensus forecasts.
“We view this strong result as providing a very positive read-across for Richemont,” which reports its fourth-quarter sales next month, Goldman Sachs analyst Jacques-Franck Dossin wrote in a research note.