Nov 7, 2013
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TAG Heuer sees single-digit sales growth this year

Nov 7, 2013

Swiss watch brand TAG Heuer expects single-digit sales growth this year and is aiming to outperform market growth estimated at about 5 percent in 2014, its head told Reuters on Tuesday.

"We're expecting to be in positive territory for the year as a whole," Stephane Linder, who took over as chief executive from Jean-Christophe Babin this summer, told Reuters on the sidelines of a factory opening in western Switzerland.

"Next year, Swiss watch exports could realistically rise about 5 percent, and we'll outperform the market," Linder said.

Swiss watch exports rose a mere 1.9 percent in the first nine months of 2013, depressed by lower demand in greater China, where retailers sat on too much stock, and a sluggish recovery in the United States, the two most important markets.

Linder said sales were slightly down so far this year in North America, where TAG Heuer, owned by LVMH (LVMH.PA), generates about a fifth of sales.

"But we're gaining market share on the $5,000 to 10,000 segment, that is encouraging," Linder said, adding sales trends in the United States and Canada had turned positive in September and he hoped to see a real rebound in the second half of 2014.

TAG Heuer, which sits alongside Hublot, Zenith, Bulgari and Chaumet in LVMH's watch and jewelry division, is aiming to double production of mechanical chronograph watch movements to about 100,000 per year by 2016 thanks to the new factory.

The brand, known for its chronographs, or mechanical watches with a stopwatch function, also on Tuesday revealed a new chronograph movement called the Calibre 1969, helping it towards greater independence from largest player Swatch Group (UHR.VX), which sells movements to peers such as Richemont (CFR.VX), LVMH and independent family-owned brands.

Pressure on rivals to build their own production facilities has been rising since Swatch decided it no longer wants to have to supply its competitors. Last month, it agreed on a compromise with Swiss competition watchdog Weko to gradually phase out movement deliveries through 2019.

"We've invested about 40 million Swiss francs into our production facilities over the last five years," Linder said, adding TAG Heuer was only indirectly dependent on Swatch because it buys mechanical movements from Sellita, which still buys many watch parts from Swatch.

Linder said the brand was also working on two other movement projects, particularly an in-house watch movement he considers key to conquering the Chinese market.

"The Chinese don't like chronographs, not yet, and we need a new, stunning watch model to develop this segment," he said, adding TAG Heuer could sell eight to 10 times more to the Chinese as its price tags starting at 1,500 Swiss francs ($1,600) should appeal to China's rising middle class.

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