Swatch profits plunge on weak China sales

Swatch Group said on Thursday that weak sales in China wiped out growth elsewhere in the first half of the year for the world's top watch company, leaving it barely profitable.

Net sales fell 11.2% to Sf3.1 billion (R68 billion), while net profit plunged 88% to Sf17 million.

"The decline in sales is exclusively attributable to China," the company said, adding that sales in other regions reached record levels set in 2023 and 2024.

"As feared, another half-year with a lot of sand in the gears", said Patrik Schwendimann, analyst at the Zurich Kantonalbank, in a market commentary.

Shares in the group were nonetheless trading up 0.8% at Sf138.25 late morning as the Swiss Performance Index added 0.7%t.

Besides its eponymous Swatch watches, the company owns high-end brands such as Omega, Longines and Tissot, and like other luxury firms the demand of Chinese consumers for Western goods has made it a top market.

But Swatch said the region's share in total sales have fallen from a third to just under a quarter as China's economy has struggled, with a real estate crisis hampering consumption by many households.

Sales to Chinese wholesalers fell by 30% during the first half of the year and were down by 15% in Swatch's retail stores. Sagging consumer demand in Hong Kong, Macao and Southeast Asia also had a negative effect, the firm added.

But Swatch said it has seen the first signs of improvement in China and expects an improved market environment in the second half of the year.

Meanwhile, first half sales growth reached double digits in North America, India, Turkey, Middle East and Australia.

"The US, Japan and India continue to have great growth potential," it said, adding it expects utilisation of its production capacity to rise in the second half of the year thanks to new product launches.

AFP