(News Bulletin 247) – The Swiss watchmaker which owns the Tissot and Omega brands published results below expectations due to the strength of the Swiss franc and in a context of slowing demand for luxury products.

The Swatch group, owner of the Tissot, Longines and Omega watch brands, fell on the stock market on Tuesday after the publication of its annual results, up but below expectations in a nervous market over the prospects of luxury.

The group published a profit up 8.1% compared to the previous year, at 890 million Swiss francs (942 million euros) despite significant investments in its production tools and commercial locations, indicates he said in a press release.

Its turnover increased by 5.2%, to nearly 7.9 billion francs. “Massively negative exchange rate effects” reduced its sales by 554 million francs, he specifies. Excluding currency effects, they increased by 12.6%.

“Figures below expectations at all levels”

“The figures are below expectations at all levels,” reacted Patrik Schwendimann, analyst at Zurich Cantonal Bank, who also notes “a clear decline in margins in the second half”, “also due to the strength of the Swiss franc “, he wrote in a market commentary. The increase in the dividend is also less than expected, he emphasizes.

The group plans to increase it by 8.3% to bring it to 1.30 francs per registered share and 6.50 francs per bearer share. Analysts surveyed by the Swiss agency AWP expected it on average at 6.88 francs. They also expected on average 7.9 billion turnover and 972 million francs in profit.

The stock fell 2.6% to 207.40 Swiss francs, around 12:30 p.m. after losing up to 3% in early trading. By comparison, the SPI, the broad index of the Swiss Stock Exchange, fell by 0.14%.

“Swatch Group seems to be the victim of two factors”, which are “the moderation of consumer demand” and “the continued strength of the Swiss franc”, estimated Luca Solca, analyst at Bernstein.

The strength of the Swiss franc weighs on the accounts

At the start of 2023, Nick Hayek, the boss of the watchmaking group, said he hoped to reach a new turnover record, at 9 billion francs. But he moderated his forecasts as the year progressed, explaining that this objective would depend on the evolution of the Swiss franc.

In the press release, the group mentioned “double-digit” growth in several markets, including Hong Kong, Macau, Thailand, India, Japan and China, with its sales even climbing by “more than 30%” in Swiss.

But exchange rate effects “affected profitability”, admitted the group, despite “continuous price adjustments” which were not enough to compensate for the strength of the franc.

For 2024, the group said it sees “very good chances of continuing its growth”, even if the evolution of exchange rates “will continue to influence” its results, he warns. To ensure its growth, it is counting in particular on the Harry Winston jewelry brand, which should exceed “one billion” in turnover, as well as on its Omega brand, which will be highlighted during the Paris Olympic Games, of which it is the official timekeeper.

Statistics for Swiss watch exports in 2023 will not be published until January 30, but the sector was already heading towards a third record year in November. However, the outlook is very uncertain.

(With AFP)