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Despite sales drop, Swatch 'strong outperformer'

August 17, 2009

Biel/Bienne, Switzerland--Due to the challenging economic environment and drop in consumer confidence worldwide, the Swatch Group saw gross sales decrease 15.3 percent to approximately $2.29 billion for the first half of 2009, compared with about $2.75 billion for the same period last year, the company announced on Friday.

According to the company, the Swatch Group was much more resistant to the negative global economic developments than most of the industry, and had overall results that were far better than the 2009 first-half export figures released by the Swiss Watch Federation.

For example, in the first half of 2009, gross sales for the company's watch segment decreased 16.4 percent to approximately $1.81 billion, compared with a 26.4 percent drop in value for the Swiss Watch Federation, the company said.

According to the company, the Swatch Group's 19 brands in all price categories, its favorable geographical mix and strong distribution network proved to be key advantages.

In addition, unlike in the previous year, foreign currencies overall did not have any substantial impact on sales, the company said.

The Swatch Group's production segment achieved gross sales of approximately $777 million, a 12.3 percent decrease compared with the first half of 2008, as a consequence of the general decrease in demand for watch movements and components.

While sales of mechanical movements were still strong, demand for quartz movements in the last six months has decreased, the company said.

The group maintained its production capacities, even though in some companies the utilization was lower than in the past. As one of the measures, some third-party activities were shifted internally, the company said, and reduced working hours are planned for the second half of this year instead of major job cuts.

Also, the company hopes new products such as the mechanical movements for Swatch and Tissot will boost sales and orders in the segment.

Based on current order books, the group expects to maintain the current level of performance in the production segment in the second half of the year.

According to the company, the group's unique brand portfolio and worldwide presence in distribution, combined with its solid equity and liquidity base, will enable it to largely overcome the difficult economic conditions and to emerge from them even stronger.

A main growth driver in the coming months will continue to be improving sales in most of the countries where demand should pick up with the anticipated weakening of the recession. The sales development in the last two to three months as well as current order entries show signs of recovery, the company said.

In addition, a slowdown in retailer destocking coupled with new product launches from Breguet, Omega and Tiffany, new mechanical movements for Swatch and Tissot, as well as new product development in practically all brands, will further improve group sales, the company said. Overall, this should enable the group to realize sales in the second half of the year that are comparable to or, for several important brands, even better than the last six months of 2008.
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