Swatch Group Sees Sales Collapse By 46.1 Percent In The First Half Of 2020
Weakened by the health crisis, the world number one watchmaker recorded a net loss of 289 million euros over the first six months of the year. Swatch Group, the world's number one watchmaker, reported Tuesday a slightly sharper-than-expected drop in sales in the first half and sees its results plunge into the red, suffering the economic impact of the COVID-19 pandemic.
For the first six months of the year, the Swiss group saw its turnover contract by 46.1% compared to the first half of 2019, to 2.1 billion Swiss francs (2 billion euros) and recorded a net loss of 308 million Swiss francs (289 million euros), against a profit of 415 million in the first half last year, the Swiss group said in a statement.
Analysts interviewed by the Swiss Agency AWP had an average turnover of 2.2 billion Swiss francs for a loss of 250 million francs. After a "positive" January, its sales collapsed with measures to combat the pandemic that "at times" led to the closure "up to 80%" of its outlets worldwide, between its own shops and those of retailers, he quantified.
260 outlets closed
The pandemic has led the group, known for its multicolored plastic watches but also the owner of major brands such as Tissot, Longines, and Omega, to accelerate the rationalization of its distribution network. Some 260 points of sale were permanently closed during the six months, resulting in "a significant reduction" in the number of employees abroad. Since December, its workforce has decreased by 6.5% to about 33,700 people.
However, the Swiss group considered that the situation "will improve very quickly" in the coming months, citing a "very high demand" in markets "that have already overcome containment." The Swiss watchmaking sector has been hit by measures to combat the pandemic both in terms of production and sales. In addition to the temporary closures of factories and shops, the collapse of tourism on which the sector depends in part thanks to its Asian clientele, which purchases luxury goods in Hong Kong and the major European capitals.
According to the Swiss watch Federation, which is due to publish semi-annual statistics for the entire sector next week, watch exports have already contracted by 35.8% between January and the end of May compared to the same period last year. The decline was particularly marked in April, with Swiss watch exports falling by 81.3% compared to the same month last year, followed by a drop of 67.9% in May.
Unreleased loss in 25 years
Swatch Group was "hit hard" by the containment measures, as the watchmaker recorded "as expected" an unprecedented loss in 25 years, reacted Patrik Schwendimann, an analyst at the Cantonal Bank of Zurich, in a stock market comment. Like other analysts, however, he was cautious about forecasts for the second half of the year.
In a note, Rene Weber, an analyst at Vontobel, also said he expected a "negative" development in the second half even though "Swatch Group sees first positive signs of recovery since May" in China and South Korea. After a slight decline in early trading, Swatch Group shares were up at 7: 30 GMT, appreciating 1.33% to 197.90 Swiss francs, against SMI, the Swiss Stock Exchange's major stock index, down 1.35%. Since January, the security has lost 29.87% of its value.