The Wall Street Journal-20080122-Swatch-s Sales Strengthen On Emerging-Market Gains
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Swatch's Sales Strengthen On Emerging-Market Gains
A jump in annual sales at Swiss watchmaker Swatch Group AG shows how big-spending clients in China and other emerging markets are helping offset economic turmoil in the U.S. for some of the world's biggest luxury-goods players.
Full-year 2007 revenue at Swatch, owner of the high-end Omega and Breguet brands, surged 18% to 5.94 billion Swiss francs ($5.4 billion).
In a statement, the company said it expected double-digit sales growth to carry into January as an increasing number of clients in Asia and the Middle East snapped up its priciest watches. Luxury-goods makers that sell a smaller portion of their wares in the U.S. vis-a- vis other areas of the world are faring better as spending slows in one of the luxury sector's biggest markets.
Companies with sales heavily concentrated in the U.S., such as Burberry Group PLC, Coach Inc. and Luxottica Group SpA, reported a slowdown in sales over the holiday-shopping season. Luxury jeweler Tiffany & Co. recently trimmed the top end of its profit forecast.
Swatch, however, generates only around 10% of its sales in the U.S., allowing it to escape relatively unscathed by the downturn, says J.P. Morgan luxury-goods analyst Melanie Flouquet. "Swatch has low exposure to the U.S. and may hence not have seen a deceleration to date in total sales," she wrote in a research note.
There are signs that China has begun to buoy the watch industry as Chinese clientele begin to outspend their counterparts in the U.S. Hong Kong, the Swiss watch industry's main corridor into China, imported Swiss watches valued at 293 million francs in November, making it the industry's biggest market that month. If the momentum continues, Hong Kong could overtake the U.S. as the world's top Swiss watch importer for the first time in a decade, according to Philippe Pegoraro, at the Federation of the Swiss Watch Industry.
