Swatch's Margins Should Improve Through Operating Leverage and Cost Discipline
We are maintaining our fair value estimate of CHF 376 per share for narrow-moat Swatch as the company reported full-year results that were weaker than our and consensus expectations. Sales for the full-year at constant exchange rates increased by 5.7% versus the 8% we expected, while operating margin grew to 13.6% from the 12.5% versus 15% we expected. Excluding the production bottlenecks brands in the second half of the year, revenue would come approximately in line with our expectations while ...Swatch Group is active in finished watches and jewelry sector with 20 brands in all market and price brackets. In addition, Co. is engaged in the sector of watch movements and components production as well as in the electronic systems sector. Co.'s operations can be divided into two segments: Watches & Jewelry, which is engaged in the production and sale of watches and jewelry; and Electronic Systems, which is engaged in the design, production and commercialization of electronic components, sports timing activities. Co. manufactures and sells watches under the following brands, among others: Breguet, Harry Winston, Blancpain, Glashutte Original, Jaquet Droz, Leon Hatot, and Omega.
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