Swatch demand ticking along nicely

Swatch demand ticking along nicely

By Haig Simonian in Biel

Published: April 29 2008 17:23 | Last updated: April 29 2008 17:23

Swatch Group, the world’s leading watchmaker, re-inforced the recent confidence of many luxury goods brands by saying 2008 had started buoyantly, with no sign of weakness in big markets or segments.

The group, which with its 18 watch marques spans the market from the six-figure Breguet to the utilitarian Swatch, said orders in the first four months of this year – including the crucial April Baselworld trade fair – had surpassed 2007’s already high levels and prompted confidence for the full year.

That suggests that, barring surprises, sales will exceed the record SFr5.94bn ($5.75bn) reported in 2007 – itself 17 per cent up on the previous year.

Nick Hayek, chief executive, gave no forecast for profits after the record SFr1.02bn the group made after tax last year. However, he gave every indication 2008 would be another record year in spite of high investment spending, surging commodity prices and unfavourable exchange rates.

“Growth is continuing at the same speed as last year, including America. Nowhere do we see signs of a slowdown; neither by region or segment. All segments are growing strongly and dynamically.”

Mr Hayek warned that the pace of demand would put continued pressure on the group – a crucial supplier of components to other watchmakers as well as its own brands. “We will need another 800 to 1,000 qualified people this year, vacancies which we can’t easily fill. Our challenge will be to find enough such people to be able to meet demand.”

Mr Hayek said the strength of demand had prompted him to cancel a planned analysts’ meeting, normally held at the watchmaker’s Biel headquarters immediately after the group’s annual media event.

The reason was because equity analysts had exaggerated the effects of the US subprime mortgage crisis on demand for luxury goods. Such warnings were a manifestation of the “herd instinct”, he said. But they “have nothing to do with the real economy”.

Mr Hayek pointed to a long-term shift in the watch industry because growing demand in developing regions, such as eastern Europe and Asia, had reduced manufacturers’ traditional dependence on established markets, such as the US. “The world has become much more balanced,” said Mr Hayek.

He doubted that the industry’s current buoyancy would prompt a new consolidation wave, as implied by last week’s purchase of Hublot by LVMH.

Instead, Mr Hayek called on other luxury goods groups to invest in manufacturing capacity, rather than buying brands which had become popular but still depended on Swatch Group for their most important components.