Swatch sweeps up share as quartz market reels

Bloomberg

Swatch Group AG reported an increase in profit for the first time in four years as Switzerland’s largest watchmaker boosted its share in the intensely competitive low-end timepiece market thanks to growth at Tissot and its namesake plastic brand.
Swatch said it has had a “massive gain” in market share in the basic and midrange segments. The company sells about two-thirds of the Swiss watches that wholesale for less than 200 francs ($213), according to Chief Executive Officer Nick Hayek. The stock rose as much as 3.8 percent in early trading.
The Biel-based watchmaker, whose midrange brands include Calvin Klein and Hamilton, is trouncing competitors as Switzerland’s exports of quartz watches slumped to a 33-year low in 2017. As Apple Inc. has catapulted itself into the position of the world’s largest watch brand, the bottom has fallen out of the low end of the industry, which has also been struggling with the strength of the Swiss franc.
“In the low market segment in general, the margins went away,” Hayek said.
“You cannot increase prices. There is a real problem. But this is not the case for Swatch Group.”
The CEO said all of Swatch’s price segments are growing. Low-end watches usually run on quartz mechanisms, which require batteries. Higher-end watches are typically automatic, fueled by the motion of the wearer’s wrist.
“Mechanical watches are picking up,” Hayek said. “The upper segment is booming. People like products that have no batteries.”
Omega is on track to eventually reach 3 billion francs in annual sales, while Longines is approaching 2 billion francs and Tissot has surpassed 1 billion francs, Hayek said.
“Swatch Group is probably winning share in the low end from traditional quartz players who are exiting the segment,” said Jon Cox, an analyst at Kepler Cheuvreux. “In the high end it is probably gaining ground in wholesale channels as other players are reducing doors.”
Harry Winston could reach 1 billion francs in sales within three to four years, Hayek added.