Swatch Group hit by Hong Kong turbulence as sales, profit fall

Swatch Group net profit fell 11.3% in the first half of 2019 as the Swiss watch maker’s sales fell as the company cracked down on unofficial sales and political turbulence in Hong Kong weighed.

The maker of Omega and Longines timepieces said on Wednesday its sales fell 4.4% at current exchange rates to 4.078 billion Swiss francs ($4.13 billion), while net profit fell to 415 million francs from 468 million francs a year earlier.

Swatch said it had seen growth in major markets which include mainland China, Japan and the United States, and all price segments which run from the cheap plastic Swatch watches to the high-end Breguet brand.

But Hong Kong, the world’s biggest export market for Swiss watches, suffered from political turbulence, affecting sales. Swatch does not break down sales by market, but the Swiss watch industry has reported a 2.3% fall in exports to Hong Kong this year.

Swatch also said it had also been carrying out “uncompromising action” against grey market dealers, especially in Europe, Middle East and South America. The crackdown against watches which are sold outside Swatch’s approved channels had a negative impact on sales in the first half running into the hundreds of millions of francs, it said.

“In the long term, this will lead to positive effects, especially in the major markets,” Biel-based Swatch said.

The company said it anticipated “strong growth” in the second half of 2019 due to easier comparisons and “continuing strong demand in most important markets.”