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Why 2021 is a good year for watches

Swatch, the watchmaker, expects a strong second half with pandemic restrictions increasingly being eased across the world

Flik Flak children watches by Swatch.
Flik Flak children watches by Swatch. (REUTERS)

Swatch Group AG may be on track to return to pre-pandemic levels of revenue this year as the maker of Omega and Blancpain watches expects a strong second half with pandemic restrictions increasingly being eased across the world.

The watchmaker will probably open more stores than it closes in the second half as the outlook improves, chief executive officer Nick Hayek said in an interview Tuesday. Growth at its own shops recovered quickly as soon as they reopened, he said. The shares rose as much as 4.2% in morning trading.

“It’s proving true that consumers like to shop even more after a crisis,” Hayek said by phone. “2021 will be a very good year, finally.”

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Consumers with pent-up demand for luxury goods and extra cash are returning to brick-and-mortar stores as vaccination campaigns advance. At Swatch, demand is outpacing production capacity, especially for brands like Omega and Blancpain, Hayek said. Swatch said late Monday it swung to a profit in the first half, beating analysts’ estimates, as demand in China, the U.S. and Russia was strong.

Revenue in local currencies will be higher in the second half compared with the year-earlier period, the company also said Monday after markets closed. Sales amounted to 3.4 billion francs ($3.7 billion) in the six months through June, compared with 4.1 billion generated in first half two years ago.

“We’re seeing an acceleration month-to-month, where we approach 2019 levels more and more or even exceed them sometimes,” Hayek said. “In July, the strong sales are continuing.”

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Tourist funk

Revenue at airports and popular tourist destinations was still down, weighing especially on the Swatch brand, known for its colorful plastic designs. The timepiece is often purchased as a gift or a souvenir on vacation. Excluding tourism, the brand is growing, Hayek said.

The company cut about 850 jobs in the first half as it closed 135 stores. Swatch decided not to renew expensive rent contracts and let contracts run out at locations with low traffic due to Covid, such as stores in shopping centers, Hayek said. The company also opened 36 ones during that time period.

“In the US, China, and even in Switzerland, there are opportunities for less expensive conditions,” Hayek said.

Operating profit reached 402 million francs. Analysts expected 338 million francs. Swatch had a loss in the first half last year and cut 2,400 jobs in its biggest cull ever.

“The results confirm the strong rebound seen at luxury houses,” Jean-Philippe Bertschy, an analyst at Bank Vontobel AG, wrote in a note.

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