Switzerland-based watchmaking company, Swatch Group AG, fell short of its sales expectations for 2023, reporting revenue of 7.9 billion Swiss francs instead of the predicted 9 billion francs. CEO Nick Hayek had anticipated a sales record due to the return of Chinese customers after pandemic lockdowns, but the underwhelming performance of Chinese shoppers impacted the company’s results.
A major factor contributing to Swatch Group’s disappointment was the strong value of the Swiss franc. The surging currency led to a dent in sales amounting to 554 million francs. The company attempted to counteract this by raising watch prices, but it was unable to fully compensate for the currency fluctuations. Swatch Group expressed the challenge of maintaining profitability amid the rapid erosion of major currencies against the Swiss franc.
While the overall Swiss watch industry is expected to achieve record exports this year, other watchmakers like Richemont have experienced a demand slowdown following a surge during the pandemic. However, Swatch Group saw success through collaborations between its entry-level Swatch brand and the high-end Omega marque. Collaborations, such as the Swatch version of the Blancpain Fifty Fathoms, contributed to increased store traffic and demand for specific Blancpain models. Specific sales figures for this collaboration were not disclosed.
Despite missing sales expectations, Swatch Group reported an 8.1% increase in net income, amounting to 890 million Swiss francs. However, this figure fell short of analysts’ consensus estimate of 979 million francs. The company remains optimistic about its jewelry brand, Harry Winston, projecting sales of over 1 billion francs for the current year. Swatch Group also expects an improvement in demand from the Chinese market.
Nevertheless, Swatch Group recognizes that exchange rate movements will continue to impact its results due to its strong industrial base in Switzerland. The company’s reliance on the Swiss franc means it must navigate any future currency fluctuations and make necessary adjustments to maintain profitability. As the luxury watch industry faces ongoing challenges, Swatch Group will need to carefully strategize to ensure its continued success in the market.
Useful links:
1. Swatch Group AG
2. Reuters: Swatch Group Sales Miss Expectations as Pandemic Disappoints Chinese Shoppers
