Swatch Group in the first half-year of 2024

Group net sales for the first half of 2024 were 10.7% below the previous year, at constant exchange rates. The negative currency impact amounted to -3.6%, or CHF -145 million.

Watches & Jewellery
The Watches & Jewellery segment (without Production) suffered a considerable decline in sales in the first half of 2024. As a result, the operating margin for the segment also saw a sharp drop, to 11.0% (previous year: 19.0%), which was also attributable to the deliberate maintening of marketing investments.

The huge reduction in demand for luxury goods in China (including Hong Kong SAR and Macau SAR) and in the Southeast Asian markets, which are heavily dependent on Chinese tourists, had a considerable negative impact on sales and results due to the strong presence of the Group’s brands in the region. In contrast to this, the Swatch brand exceeded its sales in China compared to the previous year by 10%.

In Europe, the Group’s own retail business achieved stable sales at the previous year’s level. The geopolitical conflicts unsettled many European retailers, however. Their fear of excessive stock levels led to a significant reluctance to reorders and thus a reduction in wholesale sales of over 10%. Positive exceptions to this were Switzerland and Spain.

The USA achieved the same record sales seen in the previous year. In Japan, which is one of the most important countries for luxury goods and the third-largest export market for Swiss watches, achieved record sales, with growth of over 30% compared to the previous year. Other important countries such as South Korea, India and the United Arab Emirates also considerably outperformed the previous year.

The Group’s retail activities exceeded the 45% mark of total sales in the Watches & Jewellery segment for the first time. Sales in the first half of 2024 were above those of the previous year in local currencies, except for China.

The luxury brands Breguet, Blancpain und Omega were particularly affected by the challenging market environment, while Harry Winston performed well. Swatch, Tissot and Longines were able to maintain their strong position. Demand for the MoonSwatch and Scuba Fifty Fathoms Swatch remained high throughout the entire period under review and was further accelerated by the success of the new “Mission to the MoonPhase” models New Moon and Full Moon as well as the three new “Mission on Earth” models Lava, Polar Lights and Desert.

Production
The sharp drop in orders, both from third parties and from the Group’s own brands, led to considerably lower sales and strongly negative operating results in the Production segment. The Group deliberately renounced to make any redundancies in order to mitigate the financial impact in the short term. As in the past, the strategy of maintaining all production capacities and not laying off qualified staff will enable the Group to recover more quickly and benefit more significantly from the next upswing. In a period of a strong decline in sales, the high degree of verticalisation within the Swatch Group leads to reduced margins in the short term. But as soon as the upswing sets in, the Group will start to benefit more strongly.

Electronic Systems
Segment sales in the first half of 2024 were 14.8% below the excellent previous year (at constant exchange rates), and operating profit amounted to CHF 2 million (previous year: CHF 9 million). Compared to the end of 2023, the order books had increased again by 35% by June, which suggests a rapid recovery can be expected in the second half of 2024.

Inventories
Inventories increased by CHF 399 million or 5.5% compared to December 2023, primarily in the finished products category of Watches and Jewellery. The procurement of materials was adapted to the business trend. Since May, inventories have stabilized, or have been reduced for raw materials and work in progress.

Personnel
The number of employees decreased by 0.7% in the first half of 2024 and amounted to 33,353 persons at the end of June (December 2023: 33,602).

Outlook for the second half of 2024
The Group expects the Chinese market (including Hong Kong SAR and Macau SAR) to remain challenging for the entire luxury goods industry until the end of the year. However, China’s potential remains intact. 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 is expected in Japan and the USA in the second half of 2024, accelerated by investments in the Group’s own retail network. The prospects in many European countries are promising. The Omega brand will benefit from a global media presence as the official timekeeper of the Olympic Games in Paris.

The cost-cutting program introduced at the start of the year has begun to bear fruits. The full positive impact, particularly on results in the Production segment, will be felt in the second half of the year.

The Group expects the situation to improve strongly in the second half of the year.

August 08, 2024