Swatch Group profit falls on weak China, strong Swiss franc | kbnmart

Swatch Group said sales and profits fell sharply amid a slowdown in the luxury watch industry driven by China.

The Swiss watchmaking giant, which includes brands such as Omega, Blancpain and jeweler Harry Winston, reported a 14 percent drop in sales to 3.45 billion Swiss francs ($3.85 billion) in the first six months of the year, below analysts’ expectations.

Operating income fell to CHF 204 million from CHF 686 million, also lower than expected. In addition to demand in China, the company also cited the impact of the strong franc.

Swatch said it expected the Chinese market, including Hong Kong and Macau, to “remain a challenge for the entire luxury goods industry through the end of the year.” The company said it had maintained production capacity to avoid layoffs while cutting costs.

Like other luxury watchmakers, Swatch has been under pressure since high inflation prompted consumers to cut back on spending after the pandemic boom. Less affluent buyers in particular have been squeezed, weighing on sales of lower- and mid-priced models.

The company’s management, controlled by the Swiss Hayek family and CEO Nick Hayek, has also clashed with some shareholders who have criticised its corporate governance and share price performance. Swatch shares have fallen about 17% in 2024.