Swatch invests and aims for further growth
Published: Tuesday, Jan 23rd 2024, 13:31
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Omega, Longines and Swatch watches were also in demand in 2023: the Swatch Group increased its sales but, like other industrial companies, felt strong headwinds on the currency front. In an uncertain environment, the Group continues to invest large sums in the future of the business.
Currency losses cost Swatch more than half a billion Swiss francs in sales last year, the Group announced on Tuesday. This is because the "rapid erosion" of important currencies against the Swiss franc could not be constantly compensated for by price adjustments.
Measured in Swiss francs, sales rose by 5.2% to CHF 7.89 billion, while in local currencies the increase was 12.6%. This means that growth has slowed down following an increase of 18 percent in the first half of the year. It is becoming more difficult for luxury goods manufacturers to beat the high sales figures of previous periods.
Profitability under pressure
The strong franc also left its mark on profitability: operating profit (EBIT) rose by "only" 2.8% to CHF 1.19 billion, resulting in a slight decline in the margin to 15.1%. This was also due to the extensive investments of over 800 million francs.
According to the information provided, over 300 million of this was invested in renewing the machinery and improving production. Money was also invested in warehouses and the expansion of the company's own sales network. Real estate "in prime locations" was also acquired for 220 million.
Swatch also invested on the personnel front: more than 800 new jobs were created in Switzerland alone, while the global workforce increased by more than 1,500 to over 33,600 by the end of 2023. Jean-Philippe Bertschy of Bank Vontobel commented that Swatch appears to be preparing for a strong recovery in its sales markets.
However, net profit increased by 8.1 percent to 890 million francs. Shareholders are to receive a dividend increased by 50 centimes to CHF 6.50 per bearer share.
Recovery in Asia
As expected, Swatch's business has recently recovered well in Asia, where the coronavirus pandemic still had a negative impact in 2022. In Hong Kong, Macao, Thailand, India, Japan and China, sales grew at double-digit rates last year. The Group continues to see very good growth opportunities in Japan in particular.
In Europe, sales rose by single digits, with Switzerland booming with an increase of over 30 percent. Meanwhile, North America continued its previously strong growth trend and sales are likely to continue to rise significantly, according to Swatch.
Overall, the Group wants to continue to grow in local currencies and sees "very good opportunities" in the lower and mid-price segments. In addition, the Harry Winston jewelry brand is aiming for a billion in sales, while Omega is set to score points as the official timepiece at the Olympic Games in Paris. However, the Group did not provide a specific sales forecast for 2024.
Swatch's results fell short of analysts' expectations and more was also expected with regard to the dividend. The bearer share lost around 2 percent on the stock exchange in the early afternoon.
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