Swatch Falls on CEO's Weaker Growth Comments

Shares in global watch giant Swatch Group fell Wednesday on analysts' fears that the world's biggest watch manufacturer might post growth of less than 10 percent in the second half of 2004 as the weaker dollar hits sales.

 

Swatch Chief Executive Nick Hayek acknowledged in a newspaper interview that the second half of the year was harsher than the first six months, leading analysts to revise their sales and profits forecasts downwards.

"We stick to the facts: the first half year was very good; in the second half the bar has been raised a lot - due to the strong previous-year comparison and because of the very firm [Swiss] franc," Hayek said.

"But it doesn't always have to be double-digit growth numbers in percentage terms for one to be happy."

Analysts, however, picked up on the negative tone of Hayek's interview and the references to the impact of the weaker dollar, which will eat into sales when expressed in Swiss franc terms.

Swatch reported in August it was confident regarding the second half of 2004, expecting business to develop well despite a difficult basis for comparison after a recovery kicked in during the last six months of 2003.

Swatch's group sales rose 8.9 percent in local currencies and 8.6 percent in Swiss franc terms in the first six months of the year to 1.97 billion Swiss francs ($1.74 billion).

In addition to the weaker dollar, the falling yen was reducing the purchasing power of Japanese tourists who are major buyers of luxury goods, according to industry analysts.

Hayek indicated that Swatch, which makes Omega, Tissot and Rado, may be in the market for further acquisitions. He said that while the scope for internal growth was "enormous," Swatch would also be interested in buying further firms to add to its 18 brands.