Swatch Confident For 2011 Despite Strong Franc

Swatch Group AG (UHR.VX) Wednesday reported a double-digit rise in sales for 2010 and said that, after a strong start in January, it was confident for 2011 despite the strong Swiss franc.

The Biel, Switzerland-based company said sales in early January "are already exhibiting a positive trend with double-digit growth in local currencies", which is boding well for the current year.

Swatch said gross sales rose 18.8% to 6.44 billion Swiss francs, or about $6.72 billion, from CHF5.42 billion in the year-earlier period.

The negative currency effect shaved off about 3% from sales, Swatch said. During the reporting period, the Swiss franc rose about 16% against the euro and about 7% against the dollar.

Analysts said Swatch was able to counter the strong franc by lifting prices and gaining market share and said that the company's cost controls are also going to help profit margins going forward.

"Swatch continues to maintain controlled, quality growth and a high exposure to emerging markets alongside cost discipline and a strong balance sheet," Citigroup said.

Swatch said it "expects an improved operating margin and a higher net profit for the financial year 2010 compared with the previous year."

In 2009, Swatch posted a net profit of CHF763 million. The company is scheduled to publish earnings on February 24.

Swatch said the 2010 profit "improvement will be visible in all areas of the group. Besides its core watch and jewelry business, Swiss runs a production and electronic systems division.

The main growth driver was once again the company's watch and jewelry business, where sales jumped 24.5% to CHF5.53 billion from a revised CHF4.43 billion a year ago.

"There was strong demand for Swatch products, especially in Asia, but also in Central Europe and the Middle East," Swatch said. "The demand for luxury brands, in particular, surged again."

Swatch owns luxury watch brands such as Breguet, Blancpain and Jaquet Droz but also sells mid-price brands such as Tissot and Certina as well as plastic watch Swatch, one of its most coveted brands.

-By Goran Mijuk, Dow Jones Newswires, [phone]; [e-mail]