(Adds detail, background, analyst comment, shares)
By Silke Koltrowitz
ZURICH Feb 6 Swiss watch exports to China rose
in December, data showed on Thursday, adding to signs a
difficult spell for luxury goods makers in an important market
may be coming to an end after Swatch Group's upbeat
statements on Wednesday.
Swiss watchmakers sold fewer watches in China last year
after a government crackdown on gift-giving to officials hit
demand for expensive timepieces.
Continued weakness in the Chinese market is one of the main
reasons why analysts expect luxury goods sales growth to slow in
2014, despite strong demand from the United States and emerging
market tourists hunting for bargains in Europe.
Recently, however, signs are mounting that demand for
watches in China may be picking up again.
Swiss watch exports to mainland China, their No.3 market,
jumped 18.8 percent in December, partly due to comparison with a
very weak result the year before, the Swiss watch federation
(FH) said on Thursday. They fell 12.5 percent in 2013.
Exports of Swiss timepieces to No.1 market Hong Kong, where
mainland Chinese like to shop, were down 1.8 percent in
December, after falling 5.6 percent for the whole of 2013, the
FH said, speaking of a "gradual recovery".
"The December datapoint is difficult to read given the
obvious benefits of earlier timing of Chinese New Year but it is
overall slightly positive for sector sentiment," Citi analyst
Thomas Chauvet said in a note.
"We see limited signs of restocking in the industry at this
stage although the end of destocking might be near with better
industry growth expected in 2014," he said.
Swatch Group Chief Executive Nick Hayek has said he expects
double-digit percentage sales growth this year on the back of an
improvement in demand in China.
J.P.Morgan Cazenove analyst Melanie Flouquet said in a note
that Hayek told analysts on a call on Wednesday that mainland
Chinese demand may have turned a corner, notably thanks to
increasing consumption by China's middle classes.
"Hayek believes that the consumption from 'normal' people
has now overtaken that of state employees and that this is
evident in January and first week of February sales," she said.
With its Longines and Tissot brands, the world's biggest
watchmaker has a significant exposure to the mid- and
entry-price segment. Chinese demand for Longines and Tissot
watches remained strong throughout 2013, Swatch said.
"China's new president Xi Jinping's tough stance on
corruption practices and extravagant spending is likely to limit
any recovery of the illegitimate component of luxury demand this
year," Chauvet said, adding this was likely to have a greater
impact on the high-end than the mid-range segment.
Shares in Swatch were up 1.8 percent at 1049 GMT, after
rising 4 percent on Wednesday, while shares in peer Richemont
were up 0.8 percent. The European personal and
household goods index was up 1.3 percent.
Swatch Group makes 37 percent of its revenue in Greater
China, which includes Hong Kong and Macao, while Cartier-owner
Richemont generates 29 percent of its sales there.
(Additional reporting by Astrid Wendlandt; Editing by Mark