keep my inbox inspiring

Sign up to our monthly newsletter for exclusive news and trends

Follow us on all channels

Start following us for more content, inspiration, news, trends and more

© 2020 - Copyright Fondation de la Haute Horlogerie Tous droits réservés

An excellent first half for luxury brands

An excellent first half for luxury brands

Monday, 03 September 2018
Editor Image
Christophe Roulet
Editor-in-chief, HH Journal

“The desire to learn is the key to understanding.”

“Thirty years in journalism are a powerful stimulant for curiosity”.

Read More

3 min read

The year has got off to a resounding start for publicly-traded luxury companies, with double-digit growth and a strong outlook for the full twelve months. For watch companies, it’s a similarly rosy picture.

After a gloomy 2015-2017 that chipped away at the Swiss watch industry, particularly in 2016 when exports lost 10%, happy days are here again. First off, the luxury industry in general has reported a strong first half for 2018. For the watch sector in particular, the upswing that began during the second half of 2017 (+4.9%) has carried on into this year. Numbers published by the Federation of the Swiss Watch Industry show that, for the first seven months of 2018, exports posted a solid 10% increase. Of the twenty main markets, the only notable declines have been in one or two European countries, starting with the United Kingdom (-8.3%) where the potential fallout from Brexit poses bigger threats than the devaluation of sterling, which had the effect of boosting sales. This aside, the main markets, for example Hong Kong (+29.3%) and even the USA (+7.6%), are forging ahead.

Prior to publication by Richemont of five-month results at its annual general meeting on September 10th, Swatch Group figures are sufficiently eloquent. The world’s biggest watch group has reported a record first-half 2018, corresponding to an increase in sales of 14.7% to CHF 4.2 billion. Operating result increased 69.5% to CHF 629 million. Operating margin is similarly upbeat, improving from 10% in 2017 to just under 15%. Market capitalisation has followed the same upward trend; over one year to end August, shares in the group gained close to 15%.

Swatch Group has reported record half-year revenue.
LVMH and Kering see share prices surge

Across the Alps from Switzerland, France’s luxury players have sustained an equally impressive performance. Hermès, which recorded an 11% rise in first-half revenue at constant exchange rates (+5% at current rates), has seen its share price leap by 25% over the past six months. After struggling in recent years, its watch business has gained in substance as sales climbed 9% to €77 million between January and June 2018. The company has high hopes in terms of profitability and forecasts an operating margin comparable to the 34.4% of last year. It’s a similar picture for LVMH’s Watches & Jewelry division, albeit with significantly larger volumes. The business group, which includes Hublot, TAG Heuer, Zenith and Bulgari, generated just short of €2 billion (+8%) in revenue over the six months in question. Profit from recurring operations shot up by 46% to €342 million. LVMH shares have gained 40% in one year.

Kering has its share of good news, too. Commenting on the group’s half-year numbers, Chairman and CEO François-Henri Pinault had this to say: “Kering achieved dazzling top-line and earnings performances in the quarter and six months. Our growth, grounded in the exclusivity and desirability of our brands, is remarkably healthy.” The 26.8% increase in revenue over six months was driven by exceptionally strong figures from Gucci (+36% to €3.8 billion), which already sees itself toppling Louis Vuitton from the world’s number-one luxury brand spot by lifting revenue to €10 billion in the short- to medium term. Kering’s Other Houses, which include watchmakers Ulysse Nardin and Girard-Perregaux alongside Boucheron, Balenciaga and Alexander McQueen, progressed by 31.1% to €995.5 million. Over 12 months, Kering shares have shot up by 65%. No-one would dare describe this recovery as “timid”, even in the context of an escalating trade war between Washington and the rest of the world.

Back to Top