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This story first appeared in the July 24, 2013 issue of WWD. Subscribe Today.
PARIS — Swatch Group said its sales growth slowed to single digits in the first six months of 2013, but it forecast a strong second half thanks to high-profile product launches and the continued integration of the Harry Winston brand.
The Biel, Switzerland-based group, whose 19 brands range from luxury Breguet timepieces to more affordable plastic Swatch watches, said first-half net profit rose 6.1 percent to 768 million Swiss francs, or $820.3 million. Currency conversions were made at average exchange rates for the periods to which they refer.
Gross sales rose 8.7 percent to 4.18 billion Swiss francs, or $4.46 billion, in the six months to June 30, compared with a 14.4 percent increase during the same period a year earlier. At constant exchange rates, revenues grew 7.7 percent in the first half.
“Positive growth in Swiss francs was once again recorded on every continent as compared with the very strong first-half 2012,” the world’s largest watchmaker said. “The outlook for the group remains very promising, and a strong second half-year is expected.”
Sales of watches and jewelry, which also include production activities, rose 9.1 percent to 4.04 billion Swiss francs, or $4.31 billion.
This compared with an overall 0.8 percent rise in Swiss watch exports in the first half, according to the latest data from the Federation of the Swiss Watch Industry. This was due largely to a sharp decrease in demand from China, where a government crackdown on gift giving has sharply dented sales of luxury goods.
Swatch did not provide specific guidance, but chief executive officer Nick Hayek was quoted as saying recently that the company might be able to achieve sales of 9 billion Swiss francs, or $9.52 billion at current exchange, in 2013.
Swatch Group noted that sales between September and December tend to be stronger than average because of the holiday and Christmas season.
Launches in the second half include what the company is billing as the world’s first antimagnetic watch, part of Omega’s Seamaster Aqua Terra collection, and Swatch’s Sistem51, a mechanical watch that will be priced between 100 and 200 Swiss francs, or $105 to $210.
“The continued integration of the Harry Winston brand will also make a significant contribution, as this brand has huge, almost untapped market potential in the high jewelry and watches activities,” Swatch Group said of the acquisition, which was completed on March 26.
Operating profit rose 0.8 percent to 910 million Swiss francs, or $972 million, while the operating margin decreased to 22.7 percent from 24.5 percent in the corresponding period last year.
The weak margin reflected Swatch Group’s investments, which included the first-ever Swatch stand at the Baselworld watch and jewelry fair and an automated production line for the Sistem51, due to be launched in the fall.
In addition to the acquisition of Harry Winston for an enterprise value of $1 billion, the group invested 295 million Swiss francs, or $315 million, in its distribution network and production, including machinery and equipment for factories in Switzerland.
At Harry Winston, it has settled all debts, broadened the equity capital base and increased inventory. In May, it paid $26.7 million at auction for a 101.73-carat, pear-shaped diamond and named it the Winston Legacy.
“The Harry Winston brand also has an extremely large and almost untapped potential in the watch sector, which the group now aims to expand further using its experience around the world. The necessary funds will also be invested into this activity,” Swatch Group said.
Société Générale, which has a “buy” rating on Swatch Group shares, said in a research note it expected full-year sales to grow by double digits, thanks to easier comparisons in the second half and a greater contribution from Harry Winston.