Swatch Group Reports CHF 3.445 Million in Net Sales and CHF 147 Million Net Income in H1 2024 Amid Global Challenges

Financial Overview

Swatch Group’s half-year financial results for 2024, released on 15 July 2024, highlight the company’s resilience in the face of a volatile global economic landscape. The Group reported net sales of CHF 3.445 million, reflecting a 14,3 % decrease compared to the previous year (10,7 % at constant exchange rates). The operating profit also significantly contracted, dropping from CHF 686 million in 2023 to CHF 204 million in 2024, with the operating margin declining from 17,1 % to 5,9 %. Net income similarly experienced a steep decline, standing at CHF 147 million, compared to CHF 498 million in the prior year, yielding a net margin of 4,3 %.

Geographical performance played a crucial role in these results, with Swatch Group's sales significantly impacted by a sharp drop in demand for luxury goods in China, including Hong Kong and Macau. Sales in China fell by more than 10 %, with the exception of the Swatch brand, which grew by 10 %. Outside of China, sales were more robust, with constant currency growth of 5,6 % compared to the same period in 2022. In Europe, sales remained steady in the retail segment but decreased by over 10 % in wholesale, especially in markets reliant on Chinese tourists. The USA and Japan, however, remained strong, with Japan seeing record growth of over 30 % compared to 2023.

Sales by Channel and Brand Performance

Sales distribution shifted in H1 2024, with the Group’s retail activities surpassing 45 % of total sales for the first time in the Watches & Jewelry segment. Despite challenging conditions in Asia, brands like Tissot, Longines, and Swatch held strong positions globally. The luxury brands, including Breguet, Blancpain, and Omega, were more severely impacted by the market downturn, whereas Harry Winston performed well. The continued success of the MoonSwatch collection, notably new releases like Mission to the MoonPhase and the Mission on Earth models, bolstered Swatch's performance.

Production and Costs

In response to the decline in demand, particularly in the luxury segment, the Group made a strategic decision to retain all production capacities, despite the immediate negative impact on operating margins in the Production segment. This decision is expected to allow the company to benefit from future market recoveries. The Group reported an increase in inventories of CHF 399 million, mostly in finished watches and jewellery, but they stabilised by May 2024, showing cautious optimism.

ESG Achievements and Sustainability Goals

Swatch Group continues to prioritise its environmental and social responsibility as part of its long-term strategic goals. In H1 2024, the company made substantial progress in integrating sustainable practices into its operations. Among the key initiatives was the Group’s ongoing commitment to reducing its carbon footprint. This included investments in renewable energy projects for its production facilities and an increase in the use of sustainable materials in its watches and jewellery.

The company has also strengthened its focus on circular economy practices. A new recycling programme for outdated products was expanded across several markets, enabling customers to return older models for recycling or refurbishment. Additionally, Swatch Group’s luxury brands have been pioneering the use of responsibly sourced materials, with Harry Winston ensuring all diamonds are traceable to conflict-free regions, aligning with global best practices in ethical sourcing.

Swatch Group aims to further enhance its ESG performance by 2025, with specific targets around reducing water usage, increasing energy efficiency, and achieving zero waste in its production processes. These goals are not only aligned with regulatory requirements but are part of the Group’s broader ambition to lead the luxury industry in sustainability.

Conclusion and Future Outlook

Despite the difficult market conditions, especially in Asia, Swatch Group has demonstrated resilience through strategic adjustments and consistent retail performance in key regions like the USA and Japan. The Group’s decision to maintain production capacity without layoffs is a long-term strategy that positions them well for a market rebound. Looking ahead, Swatch expects stronger growth in Japan and the USA, with Europe also presenting promising prospects. Omega's role as the official timekeeper for the Paris 2024 Olympic Games is likely to generate significant global visibility, potentially driving increased sales in H2 2024.

From an analytical perspective, while the Group has handled the economic challenges commendably, further adjustments may be required if the Chinese market does not recover as expected. A deeper analysis of their cost-cutting programme’s impact in the second half of 2024 could provide additional insights into their operational efficiency.

Swatch Group's financial performance for H1 2024 reflects both the pressures of a challenging global environment and the Group's strategic efforts to position itself for future growth. By focusing on sustainability and circular economy principles, the company is set to not only recover but thrive in the coming years.

Read the full Swatch Group report Here.

Cover Image Courtesy: Swatch Website