Swatch Cuts Staff, Stores as H1 Earnings Drop
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PARIS — Swatch Group on Tuesday reported a net loss in the first half of the year, and has cut staff and stores as it grapples with the loss of business during coronavirus lockdowns.
“We went through four very difficult months,” said Swatch Group chief executive officer Nick Hayek, speaking on a video posted on the company web site.
The world’s biggest maker of watches, which owns labels ranging from Blancpain to Swatch, said the loss in the first half totaled 308 million Swiss francs, or $327.94 million, a turbulent period when as much as 80 percent of the company’s distribution channels were temporarily shut. This compared with last year’s net profit figure of 415 million Swiss francs, or $441 million.
Responding to the steep loss of business, the group has reduced staff by 6.5 percent since December and closed 260 stores permanently since last year. It operates around 1,800 stores.
The Swiss watchmaker signaled that it considers the worst to have passed, and added that it expects positive operating result for the year.
Production has resumed, and following months of no new launches, advertising or events, the group plans to release new watch models, notably for Omega, Longines and Tissot — including the Omega James Bond Seamaster diver watch.
“All this will come in the second half,” Hayek said.
Sales came to 2.2 billion Swiss francs, or $2.34 billion, down 46.1 percent, as the coronavirus lockdowns swept across markets. In China, a key market, sales dropped off by 84 percent in February.
The first-half results were “unsurprisingly depressed given COVID-19 impact, particularly on revenue and earnings,” said Piral Dadhania, an analyst with RBC in an e-mailed research note.
Inventory, cashflow and costs appeared to be well managed over the period, which should set up the business well for the second half, the analyst added. But the group’s reliance on wholesale distribution could signal further challenges ahead, noted the analyst.
“Top-line recovery is largely wholesale-led, which is likely to be delayed as distributors deplete existing stock,” added Dadhania, noting this is especially the case in China, as shown by the contrasting recovery of the group’s own stores compared to wholesale business in May and June.
In June, the watchmaker reshuffled the upper ranks of management, drawing on loyal, longtime employees to fill key positions at labels including Longines, Tissot and Rado. Swatch Group in April slashed its planned dividend by 30 percent and cut board members’ pay.
Exports of Swiss watches, seen as an indicator of the luxury sector’s health, have fallen 35.8 percent over the first five months of the year, according to the latest statistics from the Federation of the Swiss watch industry.
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