Swatch Group up for 2008, despite slow holiday

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Swatch Group up for 2008, despite slow holiday

January 30, 2009

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Biel/Bienne, Switzerland--The Swatch Group reported that its 2008 sales were up for the year, with watch and jewelry sales increasing 6.6 percent, but a slowdown over the holiday season noticeably impacted the Swiss watch giant's year-end bottom line.

"After a promising start in 2008 with further strong growth, the year under review turned out to be more challenging," a company press release issued on Thursday said. "The turmoil and enormous destruction of wealth in the financial markets worldwide infected the economies of many countries, leading to cautious reactions mainly at wholesale level and in some parts of the world to a noticeable drop in watch demand in the last two months of 2008."

Swatch Group watch and jewelry sales increased 6.6 percent in 2008 at constant exchange rates--but only 1.8 percent in Swiss francs--following "extremely strong growth" in 2007 over 2006, the company said.

Total Group gross sales in 2008 rose 4.3 percent in local currencies and 0.4 percent in Swiss francs to 5.966 billion Swiss francs (about $5.14 billion), according to financial results. These results also reflect the divestment of automotive-components producers in the electronic-systems segment and resulting currency losses of about $200 million.

The release noted that the 3.9 percent discrepancy between gross sales in terms of local currencies and sales in terms of dollars amounted to about 233 million Swiss francs ($200 million) and was due to "extreme volatility" in foreign currencies. The euro and the British pound were particularly weak against the Swiss franc, and the U.S. dollar and dollar-related currencies were also comparatively weak. Only the Japanese yen gained some ground in 2008, the company said.

The Group's core watch, jewelry and production businesses, excluding its electronic-systems business, saw a 6.5 percent uptick at constant exchange rates and a 2.2 percent rise in terms of Swiss francs.

There was sold growth in the watch, movement and component production segment, with gross sales increasing by 7.7 percent at constant rates (7.5 percent in terms of Swiss francs) to $1.56 million.

"Once again, the group's core business activities, the segments watches and jewelry, as well as production, continued to be the main driving and growth factors," the release said.

In terms of its outlook for 2009, the company said it is projecting an economic rebound by midyear and a moderate increase in sales. Its outlook is also "cautious but not pessimistic for the next few months due to the ongoing financial turmoil; however, no expectation of a disastrous development."

The company also said the first three to four months compared with the very high previous year figures in 2008 indicate a "rather manageable recession," and that "a mild increase in consumption and sales for 2009 is expected because of an anticipated rebound in the second half of 2009."

Overall, the company said it expects modest growth in 2009, and that it will continue to take advantage of "interesting opportunities to gain market share and further strengthen its global presence."

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