PARIS — Swatch Group said Wednesday that net profits rose 20.2 percent in 2013, and the world’s largest watch group forecast continued healthy growth in 2014 after brisk sales in the first month of the year.
This story first appeared in the February 6, 2014 issue of WWD. Subscribe Today.
The company — parent of brands including Omega, Breguet, Blancpain and Swatch — posted net income of 1.93 billion Swiss francs, or $2.08 billion, in 2013 versus 1.61 billion Swiss francs, or $1.72 billion, the previous year. All dollar rates are calculated at average exchange for the period concerned.
“All brands had an auspicious start. In the first month of the year, sales of both watches and jewelry were very good. After four years of strong and dynamic growth by Swatch Group, as well as the entire Swiss watch industry, continued healthy growth is expected in 2014,” the company said.
Its board will propose a dividend of 7.50 Swiss francs, or $8.20 at current exchange, per bearer share and 1.50 Swiss francs, or $1.64, per registered share at the annual general meeting on May 14.
Gross sales at Swatch Group rose 8.3 percent last year despite currency headwinds, as reported.
The group said operating profit margin rose by 200 basis points to a record 27.4 percent in 2013. This included a positive effect of 300 basis points related to a December ruling by a Dutch arbitration body ordering Tiffany & Co. to pay Swatch Group damages of 402 million Swiss francs, or around $450 million.
The decision by the Netherlands Arbitration Institute resulted from a lawsuit after the end of a collaboration between the two companies to design, produce and market Tiffany watches.
The Swatch Group results come on the heels of weak data from rival Compagnie Financière Richemont. The parent of brands including Cartier and IWC reported last month that revenues in its fiscal third quarter rose 2.8 percent to 2.94 billion euros, or $4 billion, due to a worse-than-expected impact from exchange rates.
Swiss watch exports rose 1.7 percent between January and November 2013, according to the Federation of the Swiss Watch Industry, which is due to publish full-year results today. Sales in Hong Kong and China, the largest and third-largest markets for Swiss timepieces, were down 6 percent and 15 percent, respectively, while France posted a decline of 11.1 percent, it said.
Thomas Chauvet, luxury analyst at Citi, maintained his “neutral” rating on Swatch Group shares.
In a research note, he said Swatch shares outperformed the luxury sector in 2013, but were down 7 percent in the year to date, reflecting downgrades to consensus 2014 earnings following disappointing second-half sales, as well as continued uncertainty about the timing and magnitude of demand recovery in China.
Chauvet said he saw limited upside to his sum-of-the-parts valuation, in particular due to an adverse product mix, as midrange brands outperform the prestige segment; high exposure to the underperforming Chinese market; risks linked to the integration of Harry Winston, and adverse currency effects.