Swiss watchmaker Swatch Group has reported a decline in profits for the year 2019, citing a drop in sales in Hong Kong due to ongoing pro-democracy protests as a major contributing factor. Despite its reputation for vibrant plastic-cased watches and ownership of prestigious brands like Breguet and Omega, Swatch Group saw its net profit decrease by 13.7 percent to 748 million Swiss francs compared to 2018. Global sales also experienced a 2.7 percent decrease, totaling 8.2 billion Swiss francs for the year.
While sales met expectations, the net profit fell below analysts’ forecasts, with political uncertainties and unfavorable currency exchange rates playing a role in the disappointing results. The strengthening Swiss franc led to a 76 million franc decline in sales, but the situation in Hong Kong had the most significant impact, with a 200 million franc sales decrease in the latter half of 2019 alone.
If we exclude the challenges in Hong Kong, Swatch Group saw a five percent increase in sales during the second half of the year. Looking to the future, the company is optimistic about growth in all markets except for Hong Kong, despite uncertainties surrounding the coronavirus outbreak in China, one of its key markets. Swatch Group did not address how this potential issue could affect future sales.
Following the financial report, Swatch Group’s share price dropped by 3.86 percent to 244.10 Swiss francs during late morning trading, mirroring the 0.52 percent decrease in the broader Swiss stock exchange’s SMI index. These results align with the Swiss watch industry federation’s report of an 11.4 percent decline in Swiss watch exports to Hong Kong in 2019, reflecting a challenging trend in the industry.
The struggles faced by Swatch Group in Hong Kong highlight the impact of geopolitical and economic uncertainties on luxury goods businesses. As the company works to navigate these difficult market conditions, it will be intriguing to see how Swatch Group adjusts its strategies to overcome obstacles and drive growth in the upcoming year.
