SWGAY Swatch Group AG (PK)

The heads of two Swiss watch brands Wednesday forecast stronger sales growth in 2011 despite the impact of the Japanese earthquake and unrest in the Middle East.

Francois Thiebaud, president of Swatch Group's (UHR.VX) Tissot brand said he expects total Swiss watch exports to beat the record achieved in 2008.

"Swiss watch exports will be above the biggest peak of CHF17 billion we had in 2008, maybe even above 18 billion," Thiebaud told Dow Jones Newswires in an interview here. "Watch exports could be CHF17.5-18 billion, or even more."

He said Tissot, which sells watches in the CHF160 to CHF 1,700 range, had posted double-digit growth in the first two months of 2011.

"If I look at the Tissot, March should also be a good month. The first quarter looks good and promising for the whole year," said Thiebaud, who is also president of the Swiss exhibitors at the Baselworld watch and jewelry show.

He said he expects a similar sales trend for the whole year driven by recovering demand in Europe and North America, and booming sales in Asia.

"There is a big demand for Swiss watches which we cannot meet globally," Thiebaud said.

His confidence was echoed by fellow Swatch Group executive, Walter von Kaenel, who is also president of Longines. He said 2010 "was just fantastic for the watch industry. Fantastic, it was crazy. By all measures have been taken for 2011 to be better than 2010. It should be the best year of our history."

Von Kaenel said he expects the Japanese market to recover rapidly from the recent earthquake and tsunami disaster, while booming demand in the rest of the world could make up for any downturn in Japan.

The Japanese market was traditionally the third biggest market for Swiss watches behind the U.S. and Hong Kong, and had shown signs of recovery from its recent slump, with Swiss watch imports up 11.5% in the first two months of this year.

However, the recent disaster could curb spending on luxury products as well as reduce the numbers of Japanese tourists, who traditionally buy watches when they travel overseas.

"Knowing the Japanese, they will come back. Maybe it will take a couple of months of low business or no business, but Japan always recovers," said Von Kaenel.

All of Longines' Japanese customers had confirmed their attendance at this year's Baselworld show, von Kaenel said.

"The main disaster is the human disaster. We are all affected. It is something horrible," said Tissot's Thiebaud.

Watches which were set to be shipped to Japan may now go to other markets, Thiebaud said, although it was too early to assess the impact of the disaster on spending by Japanese tourists outside the country.

"I am sure the Japanese will recover as soon as possible, and in the next nine months sales may not be as bad as expected," Thiebaud said.

Both executives were also positive about the Middle East.

Although sales into Libya and Egypt aren't particularly large, other countries in the Middle East are significant markets for companies including Swatch, Compagnie Financiere Richemont SA(CFR.VX) and LVMH Moet Hennessy Louis Vuitton SA (MC.FR).

The United Arab Emirates is the seventh largest market for Swiss watch exports, with exports to the country rising 32.3% in the first two months of 2011, according to figures from the Federation of the Swiss Watch Industry FH.

Other significant markets include Saudi Arabia, Qatar, Oman and Kuwait, which all feature in the top 30 overseas markets for Swiss watches.

Analysts have said all these markets could be hit by lower tourist numbers in the wake of recent unrest.

"In the Middle East there are two key countries: Saudi Arabia and UAE," Von Kaenel said. "If I look at the figures this year, we have never had such a good February in Dubai as we had."

Saudi Arabia is a domestic market little affected by tourism and had a good start to the year, while Dubai had received a lot of Chinese and Russian tourists, he said

"It is too early to say, but I don't think there will be any effect on the business," Von Kaenel said.

-By John Revill, Dow Jones Newswires; +41 43 443 8042 ; john.revill@dowjones.com

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