Luxury watchmaker giant Swatch Group shares surged 5% after mid-year results on Wednesday in which the watchmaker issued a positive outlook regarding its biggest markets and reported progress in curbing grey market sales.
“The Swatch Group anticipates strong growth in the second half of 2019, on the one hand, due to continuing solid demand in the most important markets, and on the other hand, due to the fact that the second half of 2018 was characterised by a poor fourth quarter,” it said.
The company has been carrying out “uncompromising actions” – against grey market dealers in Europe, the Middle East and South America this year. The offensive against watches which are sold outside Swatch’s approved channels had a negative impact on sales in the first half running into the hundreds of millions of francs, the company said.
The campaign involved Swatch halting supply of watches to dealers who sold their products to the grey market. “In the long term, this will lead to positive effects in the major markets,” Swatch said.
During the first six months Swatch said it had seen growth in major markets which include mainland China, Japan and the United States, and all price segments which run from plastic Swatch watches to the high-end Breguet brand.
But Hong Kong, the world’s biggest export market for Swiss watches, had been badly hit by political protests in recent weeks “Sales in Hong Kong, an important sales market with attractive margins, suffered from political turbulence,” the company said. “This resulted in a double-digit decline in sales.”
The Biel-based company said total sales fell 4.4% at current exchange rates to 4.078 billion Swiss francs ($4.13 billion). Net profit fell 11.3% to 415 million francs.
Analysts said the results were a mixed bag, with sales lower-than expected although profit was ahead of forecasts.
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