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Tuesday, July 23, 2013

Swatch Group Sees Strong Growth Potential For Harry Winston

The Harry Winston salon in Paris.

The Swatch Group has big plans for the recently acquired Harry Winston brand, finding it an asset that is both complimentary and with plenty of room for growth.

The Swiss conglomerate on Tuesday for the first time partly revealed what it plans for the luxury
retail brand during its earnings report for the first half of the year. The company, which now owns 20 watch and jewelry brand, said that gross sales for the period increased 8.7% year-over-year to 4.18 billion Swiss francs ($4.47 billion). Net income increased 6.1% compared to the first half of 2012 to 768 million Swiss franc ($821,700), with a 19.2% return on net sales. Sustained growth was reported in all regions.

“The continued integration of the Harry Winston brand will … make a significant contribution, as this brand has huge, almost untapped market potential in the high jewelry and watches activities,” the company said, adding that this potential will start to be seen in the second half of the fiscal year.

Swatch Group said that following its $1 billion acquisition of Harry Winston in March, the conglomerate invested in infrastructure, settled all debts, expanded its equity capital base and increase inventory. “The latter was initiated in order to ensure that our clientele has access to the best selection of jewelry as well as to increase its availability,” Swatch Group said in its earnings statement.

“The acquisition of the Harry Winston brand did more than simply round off the group’s already broad brand portfolio; it also expanded the high jewelry segment, along with the segment’s value chain from production up to and including the retail network,” Swatch added.

In May, Swatch Group, in Harry Winston’s name, purchased a 101.73-carat diamond at auction for $26.7 million and renamed it the “Winston Legacy,” explaining that it “reconfirms the number one position of this high jewelry brand.”

Swatch says that its see the luxury watch segment of the brand as having the best potential for worldwide growth.

“The Harry Winston brand has an extremely large and almost untapped potential in the watch sector, which the group now aims to expand further using its experience around the world,” the company said. “The necessary funds will also be invested into this activity.”

In fact, the acquisition led to some company restructuring by integrating the production division into the watches and jewelry business unit. “This integration will also provide a more uniform view of activities, facilitating comparability with our competitors.”

Other highlights of the company’s first-half report include:

• Benchmarked to the 1.5% export growth for wristwatches of the Swiss watch industry in the first half of 2013, the segment Watches & Jewelry (now including production) growth was more than 9%.

• An operating profit of 910 million Swiss francs ($973,500) was recorded, with an operating margin of 22.7%, despite a high marketing spend, important investments in products and production methods, and the integration of Harry Winston.

The company said its outlook “remains very promising,” expecting a strong second half. 

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