Swatch Group AG shares rallied after the Swiss watchmaker’s first-half earnings exceeded pre-pandemic levels for the first time as China’s reopening fueled a rebound.
(Bloomberg) — Swatch Group AG shares rallied after the Swiss watchmaker’s first-half earnings exceeded pre-pandemic levels for the first time as China’s reopening fueled a rebound.
Operating profit advanced 36% to 686 million francs ($792 million) in the first half, the maker of Omega and Longines watches said Thursday. Analysts expected 604 million francs. The stock rose as much as 6.6%.
Swatch is one of the luxury-goods companies most exposed to the greater China region, which was the source of a third of its revenue last year. Chief Executive Officer Nick Hayek told Bloomberg News in January that sales could reach a record this year on the recovery in that market. Optimism about the luxury industry has been tempered by a recent slowdown in the US, which started appearing in Swiss watch exports in April.
Revenue reached 4 billion francs, ahead of analysts’ estimates. Sales in Hong Kong tripled while mainland China grew by double digits.
The company said growth was strongest in the lowest price segment of watches and jewelry. Demand for the company’s popular Omega MoonSwatch collaboration, priced at around $260, has accelerated, the company said.
“We highlight the ongoing success of the MoonSwatch and a renewed interest in watches in the accessible segment, most notably in the US,” wrote Jean-Philippe Bertschy, an analyst at Vontobel. He also said total revenue outperformed Switzerland’s watch exports for the first time in years.
Management sees “excellent” growth opportunities for the second half of 2023. “The only cloud on the horizon remains the unfavorable currency environment,” the company said.
A weak US dollar and euro against the franc shaved 242 million francs from first-half revenue.
Omega recently raised prices by about 8% in the US, according to Morgan Stanley.
Read more: Swiss Watch CEOs From Patek to Oris See Slowdown After Boom
(Updates with shares)
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