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Swatch expects bumper sales as China emerges from Covid curbs

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Swiss watchmaker Swatch is anticipating record sales this year now that travel is back to normal and China has ended its strict zero-Covid policy.

Net sales rose 4.6 per cent to SFr7.5bn ($8bn) last year at constant exchange rates, compared with a year earlier. Operating profit increased 13 per cent to SFr1.16bn, missing analyst forecasts of SFr1.19bn.

Swatch reported growth in all regions except China, where lockdowns meant sales were SFr700mn lower than expected, the company said.

“After the end of Covid-19 measures, consumption quickly recovered, not only in China, but also in the surrounding markets of Hong Kong SAR and Macau,” Swatch said in a statement on Tuesday.

The easing of travel restrictions in China would “revitalise sales in tourist destinations”, it added, saying that sales in China in January “[reinforce] the group’s expectation to aim for a record year in 2023”.

Beijing’s zero-Covid strategy over the past three years “severely dampened” growth, it said.

“Really, what matters is the fact that the outlook from a China perspective is fairly constructive and we believe that is the main driver of sentiment” in the industry, said Piral Dadhania, an analyst at RBC Capital Markets.

“Within that, Swatch has the higher revenue exposure to mainland China, and so in some ways is the most leveraged to a China recovery,” he added.

Swatch has “massively” increased its stock, spending on raw materials, works in progress and semi-finished goods, in view of potential energy shortages and delivery bottlenecks, the company said.

“This measure will also pay off, considering higher demand in China after its zero-Covid strategy exit,” it added.

The company posted double-digit sales growth in Europe, US, the Middle East and most of Asia.

In March, it launched the MoonSwatch collaboration with Omega, a £207 version of Omega’s Speedmaster. Thousands of shoppers queued up around the world to buy the watch, which has notched up 1mn sales so far.

Shares in Swatch Group were up 2 per cent in afternoon trading.

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