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Swatch Group returns to profit, sees strong sales ahead

·2-min read
A Swatch logo is pictured in front of the newly built headquarters in Biel

ZURICH (Reuters) -Swiss watchmaker Swatch Group said it expected double-digit sales growth in local currencies this year after sales and profits recovered in 2021.

It rebounded with a net profit of 774 million Swiss francs ($845 million) in 2021 after a loss of 53 million a year earlier.

Its sales at constant currency rose nearly 30% to 7.31 billion francs, the maker of Omega and Longines watches said in a statement https://www.swatchgroup.com/en/services/archive/2022/swatch-group-key-figures-2021 on Tuesday.

Swatch shares were indicated 2.9% higher in pre-market activity.

"Swatch was able to surprise the market with an EBIT above the 1 billion franc mark. The strong (free cash flow) is also a positive," Vontobel analyst Jean-Philippe Bertschy, who rates the stock "hold", wrote in a client note.

"However, we believe that the market will focus on Swatch growth, which is underperforming the market. The difference in growth to Richemont during the same period is significant, although due to specific reasons (different geographical mix, less exposure to the strong performing high end, less exposure to own retail and online)."

Sales of Swiss watches recovered strongly last year from the slump caused by pandemic-related lockdowns, but Swatch Group has been losing market share to industry major Rolex and connected watches such as the Apple Watch.

Its shares, which lagged their peers last year, fell out of the blue-chip SMI index in September.

Richemont also posted a jump in sales this month thanks to its strong jewellery business amid a wider luxury goods revival.

Swatch Group's operating margin rose to 14% from just 0.9% last year and 12.4% in 2019. Its Watches & Jewelry segment (excluding production) had an operating margin of 17.7%.

It said its board of directors would decide on its dividend proposal at its next meeting.

($1 = 0.9159 Swiss francs)

(Reporting by Silke Koltrowitz and Michael Shields; editing by Brenna Hughes Neghaiwi; editing by Miranda Murray and Jason Neely)

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