Swatch Group in progress

The new Master Co-Axial with METAS certification, the Swatch Touch Zero One, the Swatch NFC, and the Tissot T-Touch Expert Solar will enable more dynamic sales to be achieved in the next half-year.

In the first half of 2015, the Swatch Group generated net sales of 4,248 million Swiss francs at constant exchange rates, and thereby grew by 3.6%. With the further worsening of the exchange rate situation against the massively overvalued Swiss franc, group sales were reduced by an additional 56 million. The financial and currency shock of 15 January 2015 caused by the Swiss National Bank (SNB) created an imbalance in sales prices compared to Switzerland, particularly in Euro countries. Calculated in Euros, group net sales grew by 18.7%. Despite this extraordinary situation, the group will maintain its long-term strategy of defensive price adjustment policy over short-term profit.

Due to this year’s shifts in exchange rates and the new country mix, an operating profit totaling 761 million was generated, corresponding to an operating margin of 18.2%. Despite additional pressure resulting from the overvalued Swiss franc against most other currencies, as well as the low or even negative interest rate situation in some currencies and the marked-to-market valuation of the important Euro portfolio held as at mid of January, net income reached nevertheless 548 million or 13.1% of net sales.

Growth abroad
In the Watches & Jewelry segment, including Production, the Swatch Group achieved net sales growth of 3.4% at constant rates and 2.0% at current rates compared to the previous year. In Euro countries, the Swatch Group achieved double-digit growth rates in local currency. In most other countries as well, sales increases in local currency were achieved. The exceptions are South Korea, due to the slowdown in tourism caused by the MERS (Middle East Respiratory Syndrome), and Hong Kong, due to the general downturn in tourists. On the other hand, the mainland China market continues to grow, particularly for the brands in the high and middle range - and at the top of the growth list is the Swatch brand in the basic range.

Personnel
Again in the first half of 2015 over 400 new jobs were created, of which 100 in Switzerland. The latter were mainly created in brand companies. Abroad, chiefly retail personnel for new stores were hired. As a result, the number of employees increased to over 36,000 at the end of June 2015.

Training
The Swatch Group promotes vocational training at all levels, particularly for young people who wish to graduate as professional watchmaker or in related technical professions. In Switzerland, roughly 180 apprenticeships were again awarded, so that the number of trainees in Switzerland rose to approximately 450. Abroad, there are currently 140 trainees, of which 80 apprentices will receive their training at Glashütte Original in Germany. In addition, approximately 50 adults will be trained and supervised until graduation as professional watchmaker. Further, the Swatch Group has 150 students in training in its own six watchmaking schools - Secaucus (USA), Kuala Lumpur (Malaysia), Shanghai and Hong Kong (China), Pforzheim (Germany) and Manchester (UK).

Product Highlights
The antimagnetic Omega Co-Axial Globemaster Collection (METAS certified), the Speedmaster 57 Vintage Dial and the Swatch brand mechanical watches, particularly the best seller Swatch Sistem51, made a significant contribution to the good sales results. The explosive demand for the Tissot T-Touch Expert Solar resulted in significant supply bottlenecks for the brand. The necessary adjustments in production have been made in order to shorten significantly waiting times in the second half of the year.

Outlook
The outlook for the Group in all regions and segments remains very good. Despite the Swiss franc dilemma, Group Management expects a strong second half 2015.

Tourism in South Korea will stabilize again after MERS and sales in Greater China and other regions will further increase in local currency. For all brands, this growth will be supported by a high level of marketing investment, an expanded retail network and also by the many new product launches in all segments.

The high consumer demand worldwide for Swiss watches continues very dynamically across all segments, particularly also in the area of mechanical watches.

Under these circumstances, and also remaining focussed on the successful long-term strategy to increase market share, further very positive growth in local currency is expected.

August 20, 2015