Swatch Group sees sales accelerate, hopes for improved profitability

On Tuesday, Swatch Group posted a first-half net profit well below expectations, but said it expects “a significant improvement in profitability in the second half” on the back of the sales acceleration seen since May.

For the period from January to June, the Swiss watchmaker posted a net profit of 16 million Swiss francs (€17 million), down 5.8% on the first half of last year, but revenue beat expectations, rising 2% to 3.1 billion francs, the group said in a statement. Excluding currency effects, sales rose by 8.5%, it added.

By comparison, analysts polled by the Swiss agency AWP had, on average, expected a profit of 95 million francs and revenue of 3 billion francs.

The group, which owns several watch brands, including Tissot, Longines, and Omega, and also sells watch components such as dials and hands, attributed the decline in profit to its manufacturing operations, while highlighting the “robust momentum” in sales of its watch brands across “all price segments.”

“The acceleration observed in May and June, confirmed in July, is enabling better utilisation of production capacity and will lead to a significant improvement in profitability in the second half,” the company said in its statement.

In May, the Swatch brand made headlines with its Royal Pop model, a watch created in partnership with the prestigious Audemars Piguet, prompting long queues outside its stores- to the point that police had to intervene to disperse crowds at around 20 locations.

Over the half-year, its sales of watches and jewellery rose by 27% in the United States, the group reported. In China, Hong Kong, and Macao- a key market for the Swiss group- sales in its own boutiques were up 9%. Replenishment orders from third-party retailers, however, “remained modest,” it added.