The worst could be over for Compagnie Financière Richemont SA's watches business as the Swiss luxury group's efforts to mop up excess inventory in its wholesale channel appears to be paying off.

The Geneva-based company, whose brands include IWC Schaffhausen, Cartier and Piaget, on Sept. 13 said that sales in its specialist watchmaking business in the five months through Aug. 31 grew 7% year over year on a constant currency basis, or 6% at actual rates, partly driving up the retail sales performance. This follows a dismal result in the fiscal year ended March 31, when sales in the specialist watchmaking business dropped 11%. Watches accounted for 41% of Richemont's sales, which totaled €10.65 billion in the year ended March 31.

"The decline we'd seen in the beginning of 2017 is clearly over," Bank Vontobel AG analyst Rene Weber said in a telephone interview with S&P Global Market Intelligence. "Richemont did exactly the right thing in buying back the stocks, which really helped the retailers."

Weber added that retailers in Hong Kong had told him early in September that they now felt comfortable with their inventory levels.

In May, Richemont Chairman Johann Rupert said the company had mostly concluded its exceptional buyback program, launched at the beginning of 2016 and aimed at removing excess watch inventory from the wholesale channel, which he believed was overstocked. This involved repurchasing inventory from multibrand retail partners and reallocating them to other regions or dismantling them. The company booked the buyback as a one-time charge.

As a consequence of the program, retail sales gradually are turning positive, especially in Asia, Exane BNP Paribas analyst Luca Solca said in a Sept. 13 research note.

In July, Swiss watch exports grew for a third consecutive month, with the value of sales up 3.6% from a year earlier, according to the Federation of the Swiss Watch Industry. Exports to Qatar and Belgium stood out. Those to Qatar jumped 47.6% year over year and those to Belgium leaped 45.2%. They were followed by increases of 22.9% to Greece, 22.3% to China and 16.8% to Hong Kong.

Still, analysts wonder if the pace of growth will pick up in the longer run.

"The real question is the rate of recovery going forward," Mirabaud Securities analyst Alessandro Migliorini said in a telephone interview with S&P Global Market Intelligence. "My impression is that on an underlying basis it's happening a bit more slowly than we've seen in the past. This is the key outstanding question — not what will happen just now or the next couple of months but what the scope for growth is over the next two, three years."

Migliorini, who believes that the worst is over for Richemont's watches business, said the likely slower rate of growth in watch sales is largely due to two factors: the changes in distribution channels and the challenge of attracting younger consumers.

"The wholesale channels are a bit more cautious," Migliorini said. "There's also an element of being able to communicate with younger generations that is also dependent on digital strategy, and it's a bit difficult to do than [it is] for soft luxury."