SWATCH Group’s sales and profit plunged amid a China-led slowdown for Swiss watchmakers and other luxury companies.
The group, whose brands include Omega, Blancpain and jeweller Harry Winston, reported a 70 per cent drop in operating profit to 204 million Swiss francs (S$306 million) and 14 per cent drop in sales to 3.45 billion Swiss francs for the first six months of the year. That’s much less than analysts expected.
The results underscore the downturn in demand for luxury goods in China as consumers in that key market shun purchases of pricey items. Swatch Group chief executive Nick Hayek, in an interview, said the company has cut production by more than 20 per cent while keeping its workforce intact to ride out the downturn.
“The big impact is really China,” he said.
Hayek said he expects the Chinese market including Hong Kong and Macau to remain challenging for the entire luxury goods industry until the end of the year. Entry-priced brands such as Swatch and Tissot will fare better than luxury brands such as Omega, Blancpain and Breguet, he said.
RBC analyst Piral Dadhania said the Swatch Group results are worse than expected and he anticipates “material earnings downgrades.”
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Like other luxury watchmakers, Swatch has been under pressure since soaring inflation caused consumers to curb their spending after a pandemic boom. Less wealthy buyers have been squeezed the most, hitting sales of entry and mid-priced models.
Management at the company, which is controlled by Switzerland’s Hayek family, has also clashed with some shareholders who have criticised corporate governance and share-price performance. Swatch shares have declined about 17 per cent in 2024.
Hayek said the company is retaining workers to avoid the “short-term thinking” typical of many publicly traded firms, in order to be ready when the market recovers. Otherwise, he said, it would have slashed the workforce by more than 30 per cent. BLOOMBERG