Swatch stock jumps as Swiss exports 'unexpectedly' rebounded last month

Shares in The Swatch Group rose more than 4% Thursday after new data showed that Swiss watch exports “unexpectedly rebounded” in August.

Exports saw a 6.9% rise compared to a 1.6% increase in July and a 7.2% decline in June. The two-year stack comparison also showed a significant acceleration, with August exports up 11.8% versus a mere 0.9% in July and 6.0% in June.

According to Morgan Stanley analysts, the growth in August was primarily driven by the high-end segment of the market, with watches priced over CHF 3,000 being the sole category to register an increase. Precious metal watches, which climbed by 21%, contributed significantly to this growth.

However, this segment represents only 2.6% of the total units exported and features an average price point 25 times higher than the industry's remainder. In contrast, steel watches experienced a 10% decrease in exports.

Overall, the industry saw a 9.5% year-over-year decline in unit exports for August.

Despite the positive data for August, the Federation of the Swiss Watch Industry (FH) has expressed a negative outlook for the remainder of the year.

A recent press release by the FH, in conjunction with the Confederation of Watch Industry Employers (CP), highlighted the challenges faced by the industry, including the implementation of short-time working, extended vacation periods, and employee layoffs among the 700 companies employing around 65,000 workers.

Morgan Stanley analysts believe that the latest export data will have a minor positive effect on Richemont shares.

However, the outlook for Swatch Group is less optimistic.

“While there might be an initial relief rally given how poorly the shares have performed in recent months, we believe today’s data confirms that consensus expectations for 2H24 (sequential doubling of the group's operating margin) and FY25 are on the optimistic side,” analysts said.

Swatch Group’s shares have underperformed in 2024, dropping more than 28% since the start of the year.

Source: Investing.com