Luxury watch market in euphoria❗Swatch gains 6% on strong results📈

Today's trading session is proving to be relatively good for companies in the luxury watch sector. This is because Omega manufacturer Swatch Group AG (UHR.CH) and the UK's largest watch retailer Rolex (Watches of Switzerland, WOSG.UK) signalled that the appetite for Swiss watches remains healthy, even as prices rise. What's more, Swatch, which is responsible for the Omega brand, added during the publication of its quarterly results that the second half of the year could see a sizable increase in sales. 

Swatch results:

• Operating profit CHF 686 million, +36% y-o-y, estimated CHF 607.7 million (Bloomberg consensus)
• Operating margin 17.1% vs. 13.9% y/y, estimate 15.3%
• Net sales CHF 4.02 billion, estimate CHF 3.92 billion'
• Net profit CHF 498 million, +56% y/y, estimate CHF 429.4 million

Future prospects:

• Swatch Group management sees excellent sales growth opportunities in the second half of 2023
• The unfavourable currency market environment remains a risk factor (The weak US dollar and euro against the franc reduced revenues by 242 million francs in the first half of the year)

What do analysts say?

Bernstein analysts say that the full-year profit guidance assumed so far could grow at a single-digit or low double-digit rate. However, the company has performed moderately so far, with uncertain economic conditions in China, a key market for the company, a threat to further results. The company reported that earnings growth was strongest in the lowest price segment of watches and jewellery. Demand for the popular Omega MoonSwatch accelerated. In the US, watches at the lower end of the price spectrum are particularly in demand. 

Swatch chart (UHR.CH)Source: xStation 5