By Silke Koltrowitz

ZURICH (Reuters) - Swatch Group SA <UHR.VX> has said it expects "dynamic growth" this year, easing concerns of a downturn in key export destination China after market share gains in its core watch business helped sales rise 9.1 percent last year.

Swiss watchmakers sold less in China last year after the government cracked down on illegitimate gift-giving of luxury items, but Swatch - whose brands range from the cheap plastic watches which gave the group its name to pricey Omega and Breguet timepieces - has fared better than rivals.

This reflects the fact that its mid-market Tissot and Longines brands, which do not cost enough to be considered possible bribes, sell well to China's rising middle classes.

"Based on the strong start by all brands in the first few days of January, dynamic growth is expected for the entire year 2014," the world's largest watchmaker said in a statement on Friday, without giving details on its different markets.

Gross sales in 2013 rose 8.3 percent to 8.817 billion Swiss francs, just short of estimates for 8.84 billion in a Reuters poll. Sales were up 9.1 percent at constant exchange rates.

This compares with a 1.7 percent rise in overall Swiss watch exports in the 11 months to November, a sign Swatch gained market share. Swiss watch exports to Hong Kong and China, which absorbed a quarter of total watch exports, fell 6 and 15 percent respectively.

STRONG START

Analyst Luca Solca at Exane BNP Paribas noted Swatch had reported a strong start to 2014 and was positive on the outlook for the entire year. "This is very important ... as recent sector share price developments indicates clear investor anxiety and uncertainty on luxury demand," he said

Swatch shares were indicated to open 1.6 percent higher, according to pre-market data from Julius Baer.

Vontobel analyst Rene Weber estimated 3 percent of the group's sales growth was generated by jeweller Harry Winston, which Swatch acquired last year.

The company said it expected to post a good operating and net profit for 2013.

Analyst Jon Cox at brokerage Kepler Cheuvreux said it was a "very decent set of numbers given concerns about the situation in China."

Weber said he expected the group's operating margin to decline 110 basis points to 24.3 percent in 2013, notably due to the dilutive effect of the Harry Winston acquisition. However, a payment from former partner Tiffany <TIF.N> should have a positive impact on the bottom line, he said.

Last month, Swatch was awarded 402 million francs in damages from the U.S. jeweller in a lawsuit following the end of a partnership between the two luxury groups.

Swatch shares have had a strong run last year, gaining almost 28 percent and outperforming rival Richemont <CFR.VX>. It trades at 15.7 times forward earnings, at a small discount to Richemont, and in line with LVMH <LVMH.PA>.

($1 = 0.9092 Swiss francs)

(Editing by Matt Driskill and David Holmes)

 

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