Nick Hayek, CEO of Swatch Group, at the Swatch ETA factory in Grenchen, Switzerland, in 2023.
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Swatch Group reported a steep fall in first half sales and earnings on Monday as the world’s biggest watchmaker struggled with weaker demand in China.
The Swiss-based maker of Tissot, Longines and Omega watches, as well as the eponymous plastic Swatch watches, said net sales at current exchange rates dropped 14.3% to 3.445 billion Swiss francs ($3.85 billion) in the six months to the end of June.
The sales figure missed the 3.75 billion francs forecast by analysts in a consensus gathered by Visible Alpha.
Operating profit fell to 204 million francs from 686 million during the year earlier period, with the operating margin slipping to 5.9% from 17.1%, the company said. Net profit tumbled to 147 million francs from 498 million francs, it added.
Sales during the first half of the year were hurt by a negative currency impact of 145 million francs, it noted.
The drop in turnover was triggered by a slump in demand for luxury goods in China, including Hong Kong and Macau, with only the Swatch brand bucking the negative trend, increasing its sales in China by 10%, the company said in a statement.
The Chinese market would likely remain challenging for the entire luxury goods industry until the end of 2024, it added.
“However, China’s potential remains intact,” Swatch said. “The current situation presents the Group’s brands in the lower price segment with excellent opportunities for further growth and market share gains.”
Further strong growth was expected in Japan and the United States in the second half of 2024, accelerated by investments in the Group’s own retail network, it forecast. The prospects in many European countries are promising, the company noted.
Sales figures outside of China in local currencies were at the level of 2023, a record year, Swatch said.