Swatch Group sees orders rise at industry's main yearly trade fair

Reuters
Swatch watches are displayed in front of a shop at the central station in Zurich
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Swatch watches are displayed in front of a shop at the central station in Zurich February 4, 2013. REUTERS/Arnd Wiegmann

By Silke Koltrowitz

BASEL, Switzerland (Reuters) - Swiss watchmaker Swatch Group SA (UHR.VX) has seen a rise in orders at the industry's main annual trade fair, the group's chairwoman told Reuters on Tuesday in remarks that confirm an upbeat tone from the company.

Trends at the Baselworld fair are important for watch makers, who use the event as a venue to meet their main customers from the retail sector and aim to win business for the coming year.

Chairwoman Nayla Hayek, who oversees the development of Swatch Group's recently acquired jewellery chain Harry Winston, told Reuters the mood at the fair was positive. "Order intake is above last year's levels, for Harry Winston and for all Swatch Group brands," she said.

Swiss watchmakers are for the most part expecting modest sales growth this year, as they grapple with a slowdown in the important Chinese market and economic uncertainty elsewhere, executives told Reuters during the first days of the fair.

However Swatch Group - the world's No.1 watchmaker whose brands include Omega, Longines and Tissot as well as its eponymous mass-market brand - has said it expects to do better than the industry as a whole this year.

Its Chief Executive Nick Hayek said earlier this year the company should be able to outperform the rest of the industry with double-digit sales growth in 2014.

Interviewed at Baselworld's Harry Winston booth, coolly decorated in grey with white roses and showing mainly watches but also some striking diamond jewellery, Nayla Hayek wouldn't comment further on developments at group level, but detailed plans for Harry Winston, which Swatch Group bought last year for $1 billion, including debt.

SALES POTENTIAL

Asked if she confirmed the mid-term sales target for the brand given by her brother Nick when Swatch Group announced the acquisition just over a year ago, she said: "I totally agree with my brother that Harry Winston has the potential to generate $1 billion in sales at some point in the future."

Harry Winston has been in focus because investors are keen to see how successful Swatch Group's diversification into jewellery will be, and whether it can boost the Harry Winston watch business.

Analyst Luca Solca at brokerage Exane BNP Paribas estimates the brand's sales at 280 million Swiss francs ($317 million) last year.

Nayla Hayek, elegantly dressed in a blue and white wool cardigan with diamond earrings and matching bracelet, took over as Swatch Group chairwoman in 2010 and as Harry Winston CEO last spring.

The chairwoman, who cuts a somewhat calmer figure than her habitually cigar-smoking brother, said all new Harry Winston watches would be powered by in-house movements provided by Swatch's ETA unit, or another of its high-end brands Blancpain, enhancing the jeweler's credibility in timepieces.

Prices for Harry Winston's watches start at 18,000 Swiss francs, but can reach hundreds of thousands of francs for complicated models. "We have adjusted our price positioning because prices were above the market price. Now Harry Winston timepieces have a competitive price positioning," she said.

The number of Harry Winston-branded stores will rise to between 36 and 38 by the end of the year from 32, she added.

Exane's Solca said the biggest challenge for Swatch was to justify the premium paid for Harry Winston. "I was impressed how quickly they got the brand back on track," he said. "New products and store openings show the product pipeline is in order."

(Editing by David Holmes)

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