BIEL, Switzerland — Swatch Group chief executive officer Nick Hayek gave a characteristically ebullient forecast for revenues this year, despite the company’s glaring miss on predictions for 2016.
Speaking at the expanded headquarters here of its powerhouse brand Omega, Hayek said he expected group revenues to rise by 7 to 9 percent in 2017. “I expect in 2017 to see healthy growth. The signs are good; Asia is very good,” he said.
The prediction came in spite of months of continuously falling exports of Swiss watches and Hayek’s own over-optimistic forecast this time last year, when he predicted his group’s sales would rise by up to 10 percent. In the event, Swatch Group revenues tumbled by almost 11 percent to 7.55 billion Swiss francs, or $7.66 billion, while net earnings almost halved to 593 million Swiss francs, or $602 million, as profit margins dropped to their lowest level in 20 years.
Related Galleries
“This is what we see today on the horizon,” said Hayek, referring to very encouraging Asian sales since January. “The first two-and-a-half months were very strong, especially in Asia. There’s really a strong demand and good things happening.”
He acknowledged 2016 had not gone to plan, admitting the year “was not so good for the Swiss watch industry or for Swatch Group.” Figures for Swiss watch exports — the only industry data available — show 2016 sales dropped by almost 10 percent to 19.4 billion Swiss francs, or $19.7 billion.
In spite of headwinds from massive overstocking, notably among dealers in Hong Kong, the Swiss industry’s single-biggest market, and the strength of the Swiss franc, Hayek maintained Swatch Group would not slash investment or jobs, as analysts have suggested.
Group investments last year fell by 169 million Swiss francs, or $171 million, to 558 million Swiss francs, or $564 million. However, group chief financial officer Thierry Kenel said the change reflected normal fluctuation, and investment would remain around 600 million Swiss francs this year.
Group annual investment surged from 300 million to 350 million Swiss francs to 500 million to 800 million Swiss francs after 2011 to expand production capacity and invest in Swatch’s own retail. While the current range might eventually dip, spending this year would remain high to expand the group’s wholly owned store network.
Swatch Group expects to open 100 to 120 stores this year, in line with 2016. While most would be for individual watch brands, some would be labeled Tourbillon or Hour Passion, the chains selling upmarket and midmarket Swatch Group brands, respectively, said Hayek.
“You’ll have noticed retail is always performing better than wholesale, also among our competitors,” he added.
Investment in factory outlets would play a particularly big role in 2017, as their revenue growth had outpaced even high-street retail, he predicted. “Today we have 55 [factory outlets] and this business has started to grow very strongly.” Last month, Swatch Group acknowledged for the first time market estimates that sales through its own stores in 2016 had accounted for about 30 percent of total group revenues.
Hayek said he could not envisage own retail reaching 50 percent of group revenues. But individual group brands could vary widely, with the Swatch brand already making about half its sales through its own stores.