Swatch CEO Bets on Luxury Boom in U.S., Japan

Swatch Group, the world's biggest watchmaker, is betting on a luxury goods boom in the United States and a recovering Japan as its sales continue to show double-digit growth, its chief executive said on Wednesday.

Strong demand for Swatch Group's high-end brands such as Omega and Breguet, particularly in emerging markets like China and Russia, helped the Swiss company post a record net profit in 2006.

Speaking with reporters at the group's newly built skyscraper in Tokyo's glitzy Ginza shopping district, CEO Nick Hayek Jr. said he also saw huge growth potential in Japan.

"This country will boom again and we're ready for that," said Hayek, who wears two watches -- an orange Omega on one wrist, a red Swatch on the other.

"That's why we invest here, because we said we believe in this country and we know that the growth here will come back the way it was 10 years ago."

Swatch bought the plot in Ginza, where land prices are among the highest in the world, for some 130 million Swiss francs ($105 million) and spent another 35-40 million Swiss francs to build a shopping centre that is meant to be particularly accessible.

The building's facade can be rolled up to expose an open passage with seven glass elevators that contain showcases with watches. Each elevator automatically takes visitors to one of seven different brand shops on other floors.

Hayek believes that improving distribution in Japan, where watches are traditionally sold in department stores, by creating attractive shops is a crucial way of boosting single-digit sales growth there.

"Each time when we put mono-brand stores in the right place, the turnover explodes, because people like to see the brand in the relevant environment," he said.

"We wanted an open environment so we can seduce the younger generation and they say, wow, when I have the money I'll buy that watch."

Hayek said his company also wants to significantly increase its presence in the United States, where dollar-denominated sales are growing at some 30% annually.

Lured by the United States

Swatch Group is not the only luxury goods company to be lured by the United States.

Firms such as Italian eyewear group Luxottica, which makes Prada and Chanel glasses, have expanded aggressively there, venturing into smaller U.S. cities where consumers have only recently discovered the appeal of designer products.

Rising incomes have spurred demand for luxury products, from high-end fashion to exclusive resorts and cars. Hayek said while there could be some fluctuations in the market in the future depending on individual countries' economic performance, the sector would keep growing.

Swatch Group's net profit jumped 34% last year to 830 million Swiss francs on sales of 5.05 billion francs, up 12%, and Hayek said sales continued to be strong.

"We are continuing in the same way as last year when we had double digit-growth. The first months show exactly the same trend," he told Reuters after the gathering with reporters.

Known for its colorful plastic Swatch watches, the Switzerland-based company has been investing heavily in its higher-end brands such as Omega, Breguet, Longines and Tissot to transform itself into a top-of-the-line industry player.