News A mixed start to the year has not dented the confidence of the Swatch Group which, based on sales achieved this summer, is expecting better days.
This summer, for months on end, farmers and firemen gazed skywards in the slim hope that a welcome shower of rain would bring an end to a period of drought and extreme heat such as Europe had never before experienced.
The feelings of manufacturers on the Old Continent and beyond are today just the opposite: they are looking forward with increasing impatience to a gap in the clouds that will be the harbinger of brighter days.
The Swatch Group seems to have glimpsed this small ray of sunshine in July and August, with sales in the black again after a first half marked by slumps in both turnover and operating/ net profit, a downturn greatly exacerbated unfortunately by a plummeting dollar.
In local currencies, consolidated turnover of the group based in Biel fell by 1.3% in the first half of 2003, while in Swiss francs it fell by 6.6% to 1,816 million francs, with the negative impact of exchange rates accounting for 102 million during this period. In terms of operating and net profit, declines of 17.3% to 224 million francs and 9.7% to 186 million respectively were recorded.
By type of products, the period from January to June was particularly damaging for the watch sector (-8.2% to 1,267 million francs), which is normal since it is most exposed to exchange rate effects (negative currency effect of 90 million). However, not all firms suffered the same fate: while Rado and Swatch were hard hit, prestige firms such as Breguet, Blancpain or Omega, and middle of the range brands - in particular Tissot and Calvin Klein - performed relatively well.
In terms of the production of watches, movements and components, sales in fact showed a positive trend in the first half of 2003 (+1.1% to 650 million francs), with electronic systems posting only moderate losses: -3.9% to 248 million. It should be noted that in the first of these product categories, sales to third parties fell by 3.0%, to 306 million, though this decline was more than offset by deliveries to group subsidiaries.
Regarding the second half of 2003, a number of factors argue in favour of a recovery in the Biel firm's business. Firstly of course the tentative revival it observed in July and August in its stores across the world and among its distributors. But also the recent performance by the American currency, which is showing signs of staging a fight-back. Not to mention the fact that the group has continued with its cost-cutting measures, while leaving intact its crucially important marketing and R&D spending.
Will the Swatch Group find itself in a more comfortable position at the end of the year? It's a wager worth taking.
September 11, 2003