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Victims of their success?
Economy

Victims of their success?

Thursday, 17 February 2011
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Christophe Roulet
Editor-in-chief, HH Journal

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2 min read
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With a 59.1% surge in the Swatch Group’s share price and Richemont shares gaining 58.3% in 2010, both groups were clearly two of the market’s favourites last year, particularly considering that the Swiss Market Index lost 1.7% for the same period.

Over one year at end January, LVMH grew by 45%, Hermès 56% and PPR, which owns Gucci, gained 38%. Meanwhile, the CAC 40 progressed just 3% for the same twelve months. This left investors in no doubt that in early 2011, companies in the luxury sector in general, and watchmaking in particular, offered some of the best prospects for growth of any publicly-traded company.

Figures confirm this. For the first nine months of its financial year ended 31st December 2010, Richemont’s sales grew 35%. The Swatch Group posted record gross sales of CHF 6,440 million (+24.5%) with net income of CHF 1,080 million (+41.5%) and an operating margin of 23.5% (versus 17.6% in 2009). Sales for 2010 at Hermès gained 25.4%. LVMH recorded 29% revenue growth for its Watch & Jewelry Division while operating profit surged 103%.

Source: Swissquote
Source: Swissquote
Records to beat

The future looks just as rosy. As the Swatch Group noted when publishing its key figures for 2010: “The strong uptrend seen in 2010 was confirmed again in January 2011. The current outlook for 2011 appears positive, despite the unfavourable currency constellation at present, particularly the US Dollar and the Euro against the Swiss Franc.” These global giants’ share prices have, however, come under pressure these past weeks, for a simple reason: increases on this scale incite investors to pocket their gains and orientate their portfolio towards shares with better potential. Which won’t prevent watch firms from training their sights on the record levels of 2008. Records they intend beating, of course.

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