Swatch Group upbeat as China comes out of lockdown

  • H1 sales up 7.4% at constant currency
  • China lockdowns hit sales in April, May
  • Confirms goal of double-digit sales growth this year

Swatch Group stuck to its forecast for double-digit sales growth this year after pandemic lockdowns in China had less impact than feared on the world’s biggest watchmaker’s first-half results on Thursday.

After a strong 2021 recovery from the COVID-19 pandemic, Swiss watchmakers this year have grappled with extended lockdowns in the important Chinese market.

The maker of Omega watches, with more than 40% of its sales in Greater China in 2021, cited in a statement “sales losses of approximately CHF 400 million ($407 million) due to closures of warehouses and many retail stores in April and May in China”.

Bernstein analyst Luca Solca said this had naturally pushed up inventories.

Sales at constant currency rose 7.4% to 3.61 billion Swiss francs ($3.68 billion) in the first half, Swatch Group said, while net profit jumped 18.5% to 320 million francs, just short of a Refinitiv estimate.

Kepler Cheuvreux analyst Jon Cox spoke of a very strong result that “underscores the group’s structurally lower cost base – staff levels are unchanged in the half despite the business rebound”.

Cox said he expected the stock – down around 16% this year, but less so than luxury peers – to react positively. The shares, which fell out of the Swiss blue-chip SMI index last year, were indicated to open 3.1% higher, according to pre-market indications .

Swatch Group said sales had benefited from the launch in March of its bioceramic MoonSwatch, co-produced by its affordable Swatch and more upmarket Omega brands, that saw customers queuing outside Swatch stores.

The company based in Biel in western Switzerland said it had “excellent prospects in all segments with anticipated double-digit sales growth in local currencies for the entire year”.

Peer Richemont reports sales for the quarter to June on Friday.

Author: Silke Koltrowitz, Reuters

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