PARIS — Swatch Group said it has a positive outlook for the year, lending credibility to expectations for higher demand for timepieces in the coming months.
Group sales rose 1.2 percent at constant exchange to 3.71 billion Swiss francs, or $3.92 billion, with the company flagging the watches and jewelry business as “very positive.” Including the currency effect, the figure reflected a 0.3 percent decline.
Swatch said the pace of growth at all of its brands increased in local currencies in June and the first weeks of July, particularly among high-end products.
First-half sales were “broadly in line with expectations…turning positive following 18 months of negative trends,” Thomas Chauvet, Citi Research luxury goods analyst, said in a note.
While the company has been considered excessively optimistic at times, analysts focused on the upbeat view of the future.
“More constructive outlook in [the second half of] 2017, when the company will launch several new products and expects a better development in production,” noted Luca Solca, luxury goods analyst at Exane BNP Paribas.
Production sales to third parties weighed on the first-half operating margin of 10 percent, causing it to fall slightly below expectations. Third-party brands have been “very insecure” and delaying orders, Swatch said.
The company’s production activity will profit from growth of Swatch’s own brands over the rest of the year, the company predicted.
Swatch has stuck to its strategy of maintaining jobs and investments in its production base in Switzerland so it can react quickly when demand improves.
The maker of the Omega Speedmaster noted demand for watches and jewelry has picked up since the fall.
The company plans to open between 100 and 120 stores over the year, matching last year’s numbers.
Swatch’s results came the day after the Federation of the Swiss Watch Industry said it considers the long-running decline in business over.
Seen as a barometer for the luxury goods industry, watch exports from Switzerland had dropped almost 10 percent last year.
The federation was reassuring about Hong Kong, the most important market for Swiss watchmakers, saying there are signs that its recovery is strengthening.
Swatch on Friday also pointed to progress for the industry in Hong Kong, saying sales have stabilized in that market.
Significant growth was recorded by Swatch in mainland China, the company said, noting that fewer Chinese tourists made purchases in Japan because of exchange rates.
Strength in Chinese business was flagged by the company as an important factor in the 2.9 percent rise in sales growth of the watches and jewelry division at constant rates and excluding production.
Swatch sees retailers in China as gaining confidence in recent months, according to Solca, who also said the company highlighted strong business with its high-end brand Harry Winston in China during a conference call with analysts.
Solca highlighted a bullish outlook for the rest of the year from Swatch chief executive officer Nick Hayek.