Swatch Group: sales growth in 2023

Despite massive negative exchange rate effects, the Group’s companies recorded good results in 2023. The MoonSwatch that remained in strong demand, along with the launch of the Scuba Fifty Fathoms which met with a good response, contributed to these results, driven by ongoing strong enthusiasm for these timepieces. The Group expects continued growth in 2024.

At constant exchange rates, Group sales for the full year were 12.6% above the previous year (or 5.2% at current rates to CHF 7 888 million). The hugely negative currency impact was CHF 554 million or 7,4%, which weighed on profitability accordingly. The rapid erosion of major currencies against the Swiss franc could not be offset by continuous price adjustments.

Watches & Jewellery
Despite the challenging currency environment and the deliberate increased investments in marketing, the Watches & Jewellery segment (including Production) maintained the same strong operating margin as in the previous year, at 17.2%.

The segment’s export figures, at +11.9% as at the end of November 2023, were well above those published by the Federation of the Swiss Watch Industry, at +7.9%. This confirms the market share gains of the Group brands in all regions and especially in the lower price segment thanks to Swatch. In Asia, double-digit growth was achieved in Hong Kong SAR, Macao, Thailand, India, Japan, and China. Europe posted single-digit sales growth, though sales sky-rocketed in Switzerland with a rise of over 30%. In North America, the strong growth trend continued, with the Omega, Tissot and Swatch brands breaking records.

Demand for the MoonSwatch, the iconic, non-limited collection from Omega and Swatch, remained very high all year. Sales figures reached new heights all over the world. Swatch stores were virtually besieged by customers during the monthly sales of the Moonshine Gold editions. The new collaboration between Blancpain and Swatch launched in September with the Scuba Fifty Fathoms collection was also a huge success globally. Blancpain subsequently recorded a strong increase of traffic in its own stores and is currently unable to meet the massive demand for original Fifty Fathoms models.

The share of the segment’s total sales attributed to retail rose to almost 45%. Average sales per store were up 20% year on year. Swatch posted record growth of over 60%, followed by Longines, Tissot, and Harry Winston with growth in the high double digits.

Production
Good utilisation of the Group’s own production facilities improved profitability.

Electronic Systems
Despite sales erosion due to the persistent weakness of the major USD and EUR currencies, the segment maintained sales at practically the same level as in the previous year, with CHF 359 million (+1.1% at constant rates, -3.2% at current rates). Micro Crystal, the highly profitable player in the automotive and medical industries, suffered a temporary fall in profits in 2023. The high volume of catchup orders it had benefited from in the previous year, due to the shortage of chips, dropped off in 2023. For 2024, Micro Crystal is expecting a return to growth and increased profitability.

Investments
Investments totalling CHF 803 million in 2023 reflects the Group’s long-term strategy both to improve its own distribution network on an ongoing basis and to maximise its own production to remain independent of third parties.

The Group continued to renew parts of its machinery, investing over CHF 300 million in new, innovative production equipment and cutting-edge technologies (e.g. around CHF 20 million was spent on a cleanroom for watches with the Group’s own solar cell technology, especially for the new Tissot T-Touch Connect Sport). In addition, EM Microelectronic-Marin invested more than CHF 60 million in production facilities to fulfill a major medical contract spanning several years.

The Group also invested around CHF 360 million in its own retail, in keeping with the strategy it has pursued for decades. Of this, over CHF 220 million was allocated to the acquisition of multiple properties in prime locations, securing strategic sites for the Group’s own retail network.

All in all, the real estate of the Swatch Group has a historical acquisition value of around CHF 3 billion, though the net value after depreciation stands at just CHF 1.8 billion. The Group has no mortgages on its properties and their current market value is around CHF 4 billion.

Inventories
Inventories increased by CHF 436 million or 6.3%, in the categories of raw materials, work in progress and semi-finished goods. Safeguarding production with sufficient raw materials and components is a top priority for the Group. The deliberate creation of safety stocks allows it to meet demand for the brands at times when there are bottlenecks in the delivery of individual materials and when temporary transport issues arise, as is currently the case in the Middle East for example.

Research and Development
Intensive research and development activities in the year under review led to 188 new patent applications (previous year: 209).

Personnel
802 new jobs were created in Switzerland. The number of employees globally increased in comparison with the previous year by 1,541, of whom over 600 in retail, to 33,602 persons as at the end of 2023.

Outlook 2024
The Group anticipates excellent opportunities for further growth in local currencies in 2024. The Harry Winston jewellery brand will surpass one billion in turnover in 2024. Swatch and Tissot brands, as well as Longines, will continue to develop strongly in the lower and medium price segments. Omega will benefit from a global media presence as the official timekeeper of the Olympic Games in Paris. America and Japan will continue to offer great growth prospects for the Group’s brands. In China, the Swatch Group will enjoy additional demand for its strong brands in the lower and medium price segments. Exchange rate movements will continue to impact the Group’s results due to its strong industrial base in Switzerland.

The Board of Directors of the Swatch Group will propose a 8.3% higher dividend of CHF 1.30 per registered share (previous year: CHF 1.20) and CHF 6.50 per bearer share (previous year: CHF 6.00) at the Annual General Meeting on 8 May 2024.

February 08, 2024