Swatch Group Reports Record Sales

Swatch Times Square store.

Swatch Group saw its 2011 gross sales increase 21.7 percent, year-over-year, to 7.14 billion Swiss francs ($7.5 billion) with December 2011 posting the strongest month in sales in company history.

The world’s largest watchmaker shrugged off the impact of the strong Swiss franc, which negatively affected sales by 10.8 percent. “Despite this extremely negative currency effect, sales in CHF increased by an impressive 10.9 percent over the previous record year 2010,” the company said.

The company also noted that “despite enormous pressure on margins due to the catastrophic currency situation,” it expects 2012 to be another good year for operating profit and net income.

Swatch’s Watches & Jewelry segment recorded an increase in sales of 26.1 percent at constant rates to 6.312 billion Swiss francs ($6.65 billion). Greater China was a very strong market bu the company said it “experienced significant growth” in all regions and price segments. “Investment in retail activities as well as numerous marketing offensives throughout the world contributed to these gratifying sales figures,” the company said.

The brand’s Production segment, where it provides watch components to other watch companies, reported a 32.6 percent increase in sales to 2.015 billion Swiss francs ($2.12 billion) due to “an enormous increase in demand for all types of components. Despite an expansion of production capacity, there were and still are major production bottlenecks,” the company reported.

The Electronics Systems segment mainly felt the effects of the overvalued Swiss franc against the US Dollar and the downtrend in certain key markets. Gross sales fell 16.3 percent to 336 million Swiss francs ($354.1 million).

“Despite the strongly negative currency impact during the course of the year and our traditionally defensive policy concerning price increases, Group Management expects good results for operating profit and net income,” the company said in its report. “The Swatch Group is confident of again generating qualitative growth in 2012, despite the ever more challenging comparison basis.”

Bulgari Sales Up 20%, Jewelry Sales Up 28%

Bulgari Group said Wednesday that fourth quarter 2010 sales increased 20.5 percent at current exchange rates to 357.8 million euro ($491.3 million) at current exchange rates (Sales increased 11.4% at comparable rates).

“The fourth quarter results certify a definitive recovery in all geographical areas and product categories,” the Italian luxury jewelry house said in a statement. “An excellent performance by jewelry was thus accompanied by highly positive accessory and perfume sales results, whilst with regard to watches the Serpenti, Bulgari Roth and Bulgari Genta collections, launched during the quarter, had an excellent start.”

Strong sales gains were reported in all regions, with the strongest growth in Asia.

By product category, jewelry sales grew by 28.3 percent to 166.7 million euro ($229 million) for the period, the company said. Excluding the significant but volatile contribution of the high jewelry segment, the category increased by 36 percent
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Watch sales grew by 7 percent for the period to 73.5 million euro ($101 million), after three weak quarters. Its accessories business posted a 31.4 percent uptick and perfumes also did very well, with a 14.1 percent rise.

By region, the fourth quarter saw U.S. increase by 10.3 percent. Sales in Europe rose 8.4 percent and Middle East rose by 13.9 percent.

The company noted the “spectacular” sales gain in Asia at 37.7 percent, including the “progressively improved” performance in Japan, up 24.9 percent. Sales were up 47.3 percent in greater China. The remaining areas of Asia grew by 48 percent.

“These sales results are highly satisfactory overall, and represent a record fourth-quarter turnover in the history of the company, thus confirming the recovery we had already noted in the previous quarters, said Francesco Trapani, Bulgari Group CEO. “The performance of watches, in particular, demonstrates that with the expansion and the upgrading in our offer we are going in the right direction. In the core business of jewelry, the innovation and design of the Bulgari brand have achieved excellent performance levels both in the basic and high-end segments, in spite of the challenging comparison bases. Lastly, perfumes and accessories prove once again that the diversification strategy aimed at competing at the highest levels in the market is winning. In conclusion, these data are definitely a good starting point for the months to come, and induce me to a cautious optimism.”

Tiffany 2Q Worldwide Sales Up 9%

While much of the jewelry and luxury industries are struggling to come to grips with the unsettled economic environment, Tiffany & Co. continues to experience significance growth.

The luxury jewelry retailer said Friday that its worldwide net sales rose 9 percent to $668.8 million in the second quarter, year-over-year, with solid growth in most regions. On a constant-exchange-rate basis, which excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales rose 8 percent and same store sales (a strong indication of growth or weakness among stores) rose 5 percent.

Net earnings from continuing operations rose 19 percent to $67.7 million for the period ended July 31, which the company said is due to higher operating margins. Net earnings from continuing operations adjusted to exclude nonrecurring items rose 45 percent. As a result, the company modestly increased its full year earnings growth outlook.

“Tiffany's financial performance in the quarter continued to demonstrate the benefits derived from a growing global presence, with roughly half of our sales now occurring outside the U.S.,” Michael J. Kowalski, Tiffany chairman and CEO, said in a statement. “In the quarter, we were pleased that sales increased in most countries and product categories.”

Despite the overall growth in sales, Mark Aaron, Tiffany vice president-Investor Relations, said in a conference call Friday that sales were hurt due to “softer than expected” growth of 8 percent to 350.4 million in the Americas, which consists of the U.S., Canada and Latin/South America. However, Aaron described sales growth in Asia-Pacific region as “generally solid” and offset the weaker growth areas, which also includes Japan, which he said was “probably not surprising.”

In the Americas, sales increased 8 percent to $350.4 million in the second quarter, “which was lighter than we expected, especially due to softness earlier in the quarter,” Aaron said. “The 8 percent increase entirely resulted from an increase in the average transaction size.” He added that the company reported “healthy growth” in most transactions price points, particularly at the highest end. However, transactions under $500 declined.

On a constant-exchange-rate basis, sales rose 7 percent and same store sales increased 5 percent for the quarter. Sales in the New York flagship store rose 8 percent (due primarily to increased tourism) while Americas' branch store sales increased 4 percent. Internet and catalog sales in the Americas fell 2 percent for the period. Aaron noted, “continued and pronounced softness” in the company’s Southwest U.S. region, which includes of Southern California, Arizona and Las Vegas.

Sales in the company’s Asia-Pacific region (excluding Japan) recorded a 21 percent increase in sales to $111.5 million. On a constant-exchange-rate basis, sales rose 17 percent for the period, with the largest percentage growth in China, Hong Kong, Macau and Korea. Same-store rose 7 percent. During the quarter, the company opened a store in the new Marina Bay Sands Resort in Singapore (its fourth in Singapore) and a store in the IFC Mall in Shanghai (its 12th in China).

In Japan, sales rose 4 percent to $118 million in the second quarter. On a constant-exchange-rate basis, sales declined 2 percent and same store sales fell 7 percent.

Europe was another strong performer for Tiffany, as sales increased 14 percent to $76.9 million in the second quarter. On a constant-exchange-rate basis, sales rose 25 percent, with similarly strong growth in the U.K. and continental Europe. Same store sales rose 21 percent for the period.

Other sales declined 19 percent to $11.9 million in the second quarter primarily due to lower wholesale sales of rough diamonds, the company said. 

“Worldwide sales grew in all major categories in the second quarter,” Aaron said. “Sales of engagement rings grew strongly in the Americas, the Asia-Pacific and Europe largely due to solid growth in units as well as higher average price. There was modest growth in statement jewelry sales over $50,000 and a continued strong performance in celebration rings and other popular jewelry collections, such as Victoria, Metro and Heart. The Keys collection remains strong at higher price points. There was a healthy demand for gold and platinum jewelry in contrast to silver jewelry sales, which were virtually equal to the prior year. The designer jewelry category had a good increase. And we pleased to see watch sales up more than 30 percent in the quarte,r reflecting strong interest in our new Tiffany brand design.

In addition, the company plans to release new products including a collection of yellow diamonds that were first launched in Japan and Australia and which will be available in all areas. Next week, the company plans to launch a much talked about collection of leather handbags and accessories in select U.S. stores and online.

In its 2010 outlook, Tiffany said it expects a worldwide sales increase of approximately 11 percent. By region, sales are expected to increase approximately 10 percent in the Americas, mid-twenties percentage in Asia-Pacific, to decline by a low-single-digit percentage in Japan and to increase by a mid-teens percentage in Europe. Other sales are expected to increase modestly from the prior year.

The company plans to open of 14 new stores in 2010 (five in the Americas, seven in Asia-Pacific and two in Europe).

“We look toward the second half of the year with a sense of guarded optimism, continuing to grow our worldwide store base and launching a range of exciting new products, including an extraordinary collection of jewelry with yellow diamonds and an enticing new collection of handbags and leather accessories, among many others,” Kowalski said. “So far in this third quarter, consolidated worldwide sales are growing at a low-double-digit percentage rate over last year, with varying results by region.”

The company increased its annual net earnings outlook to $2.60 - $2.65 per diluted share (from $2.55 - $2.60 previously.

Tiffany & Co. operates 223 TIFFANY & CO. stores and boutiques (91 in the Americas, 57 in Japan, 48 in Asia-Pacific and 27 in Europe), versus 211 locations a year ago (88 in the Americas, 57 in Japan, 42 in Asia-Pacific and 24 in Europe).