Swatch sees double-digit China growth for mid-range
BASEL (Reuters) - The world's biggest watchmaker, Swatch Group (UHR.VX), sees double-digit sales growth in China this year for its mid- and entry-price products, even though demand for luxury goods has weakened in recent months.
Several Swiss watchmakers admitted this month that demand for upmarket pieces had gone down due to the government's crackdown on illegitimate gifting and conspicuous consumption.
Swatch has so far fared better than rivals such as Richemont (CFR.VX) and LVMH (LVMH.PA) thanks to its lower-priced brands, mainly Tissot and Longines, which have continued to sell well in Asia.
"We expect single-digit sales growth in the Chinese market this year for the high end, including Breguet, Blancpain and Jaquet Droz," Swatch Chairwoman Nayla Hayek told Reuters on the sidelines of the Baselworld watch fair on Monday.
"The other brands will certainly grow more, they are performing very well. They can generate double-digit growth."
At Swatch, which does not release quarterly figures, constant-currency sales growth was 12.2 percent in watches and jewelry in 2012, compared with 9 percent at Richemont for the year ended March 31.
"It's not that the high-end watches are not doing well, that would be a lie. Blancpain still grows very well for example, but no longer at a double-digit pace," Hayek said.
The heads of Swatch Group's Tissot and Longines brands told Reuters last week they were still seeing robust growth in Asia. The more expensive flagship brand Omega also still expects growth in China this year.
Meanwhile the Middle East's top shopping destination, Dubai, is benefiting from political instability elsewhere in the region. "Rich people who might otherwise have travelled to Egypt, for example, now go to Dubai," Hayek said.
But the Middle East as a whole is a substantially smaller market than Asia, and that same instability has hit luxury purchases in Iran, Iraq, Kuwait, Egypt and Syria.
NO JEWELLERY BUYS
Swatch Group's growth in the U.S., the second largest market for Swiss watches after Hong Kong and before mainland China, should benefit from its recent acquisition of the Harry Winston jewelry and watch business in the U.S. for $1 billion.
"We want to introduce Harry Winston watches to the wholesale channel and that may increase the share of watches a bit (from 30 percent currently)," she said, adding that Harry Winston would remain a high-end brand.
She said Swatch Group had no plans to expand in jewelry, either via acquisitions or through synergies between Harry Winston and other brands in its portfolio.
"We have jewelry at Breguet and Omega, that is enough for the time being," Hayek said. "We bought Harry Winston as a brand. When my father bought Breguet, he did that because he had a vision of how to revive the brand. Harry Winston is in jewelry what Breguet is in watches."
Last week, France's PPR (PRTP.PA), which owns the Gucci brand, said it was buying the Milanese jeweler Pomellato with the aim of developing it into a global brand and expanding PPR's presence in the jewelry market.
CEO Nick Hayek said in January that Harry Winston had the potential to generate more than 1 billion Swiss francs ($1.07 billion) in sales and 250 million net profit in about four to five years.
Nayla Hayek said the Swatch brand, known for its colorful plastic watches, will also continue to grow thanks notably to a new mechanical watch, the Sistem 51, to be sold for as little as 130 francs.
"With this watch, we're also targeting the Asian market, where people are in love with mechanical watches that normally cost much more and that they cannot afford," said Hayek, who took over as chairwoman after her father died in 2010.
($1 = 0.9368 Swiss francs)
(Reporting by Silke Koltrowitz; Editing by Kevin Liffey)