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Economic Tensions Take Toll on Swatch Sales
Despite lower-than-expected 2018 sales, the Swiss watch company has high hopes for the year ahead.
Pictured here is Omega’s Seamaster Professional Diver 300, updated for the watch brand’s 25th anniversary and unveiled at Baselworld 2018.
Biel/Bienne, Switzerland—Swatch Group posted lower-than-expected full-year results as trade and economic tensions weighed on sales in Asia and France.
In its annual report, the Swiss watch company reported sales rose nearly 6 percent to 8.48 billion Swiss francs ($8.54 billion) compared with the 7.98 billion Swiss francs ($8.03 billion) reported in 2017.
Its watches and jewelry segment, which includes brands like Tissot and Longines, accounted for 8.21 billion Swiss francs ($8.26 billion) of the total.
Net profit for the year rose nearly 15 percent to 867 million francs ($872.33 million), ahead of the 755 million ($759.64 million) Swiss francs in 2017.
Still, the results fell short of the 8.65 billion francs ($8.70 billion) in sales and 952 million francs ($957.86 million) in profit that Reuters analysts had expected. Its 8 francs ($8.05) per share dividend was also lower than analysts had forecasted.
Looming fears of a trade war coupled with a slowing Chinese economy took its toll on sales of luxury watches both in China and when its residents traveled abroad.
“High growth rates were achieved again in Asia, both in wholesale and in the group’s own retail including e-commerce, although a downturn in demand occurred in the last three months of the year, particularly in wholesale,” Swatch said in a statement.
The company saw positive growth in Japan and North America, but Europe was a bit more complicated. While Great Britain and Switzerland increased sales, France’s “yellow vest” protests, fueled by the belief that the French government’s economic policies favor the rich, cut into end-of-year sales.
Looking ahead, Swatch plans to turn the year’s lemons into lemonade, forecasting that “China will become a major opportunity for the group in 2019, even if ongoing market turbulence remains disruptive.”
The company said 2019 has started off on a high note, experiencing solid growth in the month of January.
In its jewelry segment, Swatch pointed to Harry Winston as a brand gearing up for strong growth in 2019, following its $50.37 million November purchase of the Pink Legacy, an 18.96-carat fancy vivid pink diamond once belonging to the billionaire Oppenheimer family behind De Beers.
In the watch division, the company has high hopes for Blancpain’s Fifty Fathoms collection as well as Omega’s products celebrating the 50th anniversary of the moon landing and the brand’s special edition “Minus 1” collection, launching in the second half of 2019 ahead of
the 2020 Olympic Games in Tokyo.
The company struggled to meet demand for the Longines V.H.P. (Very High Precision) collection after production issues in 2018 but said solving those problems is expected to have a positive impact on the brand in 2019.
Meanwhile, Tissot is expected to introduce its T-Touch smartwatch with its own operating system this year as well, ready to take on the smartwatch competition.
The company introduced Swatch Pay, which works similarly to contactless Apple Pay, in Switzerland and plans to expand to other countries throughout the year.
A total of 212 patent applications were filed in 2018, a 15 percent jump compared with 183 the previous year, amounting to one patent per working day, according to the company.
In February, Swatch plans to launch its first Sistem51 watches with its patented Nivachron balance spring with anti-magnetic properties.
Going forward, the company said it plans to feature anti-magnetic properties in all its mechanical watches, as well as a longer guarantee period, to improve precision and reliability as well as to gain market share and a competitive edge.
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