Swatch Group: 2010 Sales exceed CHF 6 billion for the first time

• The extraordinary strength of our brand portfolio was again reflected in an excellent performance by the Watch segment in practically all markets and price segments, with an increase at constant exchange rates of +28.1%. • Marked upturn in the Production segment, especially in the second half of the year, with a year-on-year increase in sales of +7.5%. • Positive trend in the Electronic Systems segment with sales up by +11.7% on 2009. • Improved operating margin compared to previous year as well as higher net income expected, despite an unfavourable currency constellation at year-end. • After a strong month of December with 21% growth at constant rates in the segment Watches & Jewelry, there are already indications in January 2011 of continued double- digit growth. Outlook remains optimistic in the entire year 2011 for further strong organic sales growth.

Group Overview
After the financial crisis, markets began to normalize towards the end of 2009 with consumer confidence returning. This positive trend continued and strengthened further in 2010. With its broad basis in all price segments and its strong presence in both established and emerging markets, the Swatch Group was able to profit from this clearly improved environment.

At the gross sales level, the Group posted vigorous growth of 21.8% at constant exchange rates in 2010. The accelerated appreciation and considerable volatility of the Swiss Franc, especially against the Euro and Dollar currencies, was a challenge for the Group throughout the year. Foreign currencies had an adverse impact on sales of CHF 164 million or -3% in 2010. Despite this, the Group posted an absolute record with gross sales of CHF 6 440 million, topping the previous record year 2008 by 8%.

All the Group’s segments contributed to this very positive result. Whereas the Watch segment posted strong growth rates throughout the entire year, growth momentum picked up again in the Production segment during the second half of 2010. Also in the Electronic Systems segment, which is more sensitive to currency exposure, the economic recovery boosted sales.

Watches & Jewelry
The Watches & Jewelry segment posted gross sales of CHF 5 532 million in 2010. At constant exchange rates this is an increase of +28.1% on 2009 (+24.5% in Swiss Francs) and +20.7% on the previous record year 2008 (+14.9% in Swiss Francs). This excellent performance is also visible in comparison with the export figures published by the Federation of the Swiss Watch Industry for 2010.

After a brilliant start to 2010, sales reached record levels in the second half as well. All regions contributed to this outstanding development. There was strong demand for Swatch Group products, especially in Asia, but also in Central Europe and the Middle East. The demand for luxury brands, in particular, surged again. But the other price segments also reported significant growth rates in the year under review. Many of the Group’s brands topped their previous record levels, some substantially.

Production
The Production segment saw a noticeable resurgence in 2010, particularly in the second half of the year. Gross sales reached CHF 1 539 million, up +7.5% on 2009. The extremely dynamic growth in the Watch segment impacted positively on orders received and sales in the Production segment with the usual time lag. This boosted capacity utilization to a greater extent and faster than expected, which in turn led to bottlenecks in certain areas. Priority was given to customers who had placed their orders on time, based on their confident outlook at the beginning of 2010.

The Group’s clear commitment to preserving jobs worldwide during the financial crisis proved to be very positive, given this strong upturn.

Electronic Systems
As the economy recovered, the market environment for the Electronic Systems segment also improved in the course of the year. Gross sales rose by +11.7% versus 2009 to CHF 440 million, thus reflecting the much improved outlook for the industry. With the divestment of the stepping motor manufacturing unit of Microcomponents and the sale of its subsidiary Lasag, the Swatch Group continued its strategy focussing on core business.

Expected earnings 2010 and Outlook 2011
The Group expects an improved operating margin and a higher net profit for the financial year 2010 compared with the previous year. This improvement will be visible in all areas of the Group. The record figures expected in absolute terms will be attenuated by the extremely strong Swiss Franc.

The outlook for 2011 remains positive, despite a negative foreign currency development, particularly in the US Dollar and the Euro, against the Swiss Franc. The Swatch Group will further generate dynamic and organic sales growth in 2011 and continue investment in its distribution and the expansion of its production capacities. The latter applies to both standard products as well as new products which were launched in the markets very successfully at the year-end of 2010, such as the New Gent from Swatch, the Ladymatic from Omega and the world exclusive “Type XXII 10 Hz” chronograph from Breguet. Other product launches are planned for spring 2011.

Sales in January 2011 are already exhibiting a positive trend with double-digit growth in local currencies. The optimistic expectations are supported by the Group’s strategic positioning in all market segments and its geographic presence throughout the world.

Contacts:

Media
Béatrice Howald, Spokesperson The Swatch Group Ltd, Biel/Bienne Tel. +41 32 343 68 33, Fax +41 32 343 69 22 e-mail: press@swatchgroup.com


Investors
Thierry Kenel, CFO The Swatch Group Ltd, Biel/Bienne Tel. +41 32 343 68 11, Fax +41 32 343 69 16 e-mail: investor.relations@swatchgroup.com