Following the announcements by the Swiss Watch Federation with slightly growing export numbers and record results by LVMH for the year ended December 31st, Swatch Group has just announced its 2019 results, which aren’t as positive as its competitors and the whole market. At CHF 8,243 million, the group net sales are down 1.8% at constant exchange rates and down 2.7% at current rates. The operating result is down 11.4% at CHF 1,023 million.
Luxury brands have felt the impact of the complex situation in Hong Kong. The Chinese Special Administrative Region is the largest market for Swiss watch exports – about 12% of the total exports in 2019. Swatch Group comments that its performance was particularly affected by the situation. The drop in sales in Hong Kong for the second semester alone was approximately CHF 200 million. As a result, the profitability of the Swatch Group is down, with a net income of CHF 748 million, -13.7% to the previous year. Excluding Hong Kong, sales increased in the second half of 2019 by 5% at constant exchange rates.
As a comparison, Swiss Watch Exports have grown by 2.4% in 2019. The export statistics indicate an overall positive performance for the high-end segment but an entry-level segment under pressure. In particular, the smartwatch expansion seems to come at the expense of the lower-priced Swiss timepieces. With its 18-brand portfolio, Swatch Group is the most exposed player to the low/mid-end segments among industry giants, with brands such as Swatch, Tissot or Hamilton.
A key element of Swatch Group’s financial statements can be seen on the inventory side (which includes components, movements and watches), as the group reports inventories of CHF 6,852 million – down 1% compared to 2018, but still very high.
For 2020, Swatch Group states that “group management expects healthy growth in 2020 in all markets in local currency, with the exception of Hong Kong SAR“.
For more information, please visit www.swatchgroup.com.