SWGAY Swatch Group AG (PK)

Recovering demand in Japan led the 37% surge in exports of Swiss watches during April, according to data released Thursday.

The annual increase in sales to CHF1.57 billion ($1.8 billion) was an acceleration from March, when sales increased 11.2% in real terms. In nominal terms the gain was 32.1%, according to data released by the Swiss customs office.

The figures show how the watch industry has overcome fears of a decline in sales in Japan following the tsunami and earthquake in March.

Against all expectations, sales exports to Japan rose 44%, the Federation of the Swiss Watch Industry FH, said.

Earlier this month, Compagnie Fianciere Richemont (CFR.VX), which sells watches under brands such as IWC and Piaget, said its sales into the country had risen by 3% in April.

"Japan was really strong, much better than expected," said Patrik Schwendimann, analyst at Zuercher Kantonalbank.

Before the earthquake, Japan was recovering after several years with a difficult environment, he said.

"There was an initial drop after the earthquake, but it now seems like it was a non-event for the luxury industry," Schwendimann added.

The boom in Japan will have helped Richemont in particular, which has around 11% of its sales in the country.

The Asian markets of Hong Kong, China, and Singapore maintained their rapid growth, with all seeing watch imports rise by more than 40% in April, the Swiss watch federation said.

The U.S. market, the world's second largest after Hong Kong, increased by 48.6% while Middle Eastern markets also reported strong increases.

The United Arab Emirates reported watch imports up 54.6% and Saudi Arabia up 50.1%.

Earlier this week, Swatch Group (UHR.VX) said it was buying a 33% stake in Alzouman General Trading Co, a Saudi Arabian-based firm which distributes the watch company's Swatch and Flik Flak brands.

Jon Cox, analyst at Kepler Capital Markets, said the sales growth came despite the continued problems with the strong Swiss franc.

"These were very strong results," he said. "In local currencies, the exports would be around 10% higher."

Exports of watches at all price points increased, although higher-end pieces led the growth, with all segments above CHF200 reporting increases higher than 30%.

Watches which sell for less than CHF200 increased exports by 20% by volume and value, the Swiss watch federation said.

ZKB's Schwendimann said it was normal for the high-end watches to lead the growth because of less competition in that segment, and higher sales in emerging markets.

"It seems to be the higher end which is doing well, which would support Richemont. But Swatch also has higher end brands like Breguet and Omega which are doing well," he said.

Analysts are now revising their estimates for full year sales.

"I was expecting a 10% rise this year, but that's looking a bit low now, and I will revisit the data," said Jon Cox, analyst at Kepler Capital Markets.

Patrick Hasenboehler, at Bank Sarasin, said he had previously expected exports to rise around 10% in 2011, but now expected a rise of around 15%. He expects Swiss watch exports to exceed CHF18 billion in 2011, overtaking the previous record of CHF17 billion in 2008.

"There is still enormous demand for Swiss watches, particularly in emerging markets where people want the high-end watches," he said.

At 0808 GMT, Swatch shares were down 0.3% at CHF419.50 and Richemont was off 0.3% at CHF53.25 on the Swiss Market Index, which was trading up 0.2%.

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

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