Keystone
The Swatch watch group has had a difficult year. In view of persistently weak demand in the important Chinese market, sales fell significantly and profits collapsed at Group level.
Sales in 2024 fell by 14.6 percent compared to the previous year to 6.74 billion Swiss francs, as Swatch announced on Thursday. Adjusted for currency effects, sales fell by 12.2 percent. Analysts had expected an average organic decline of 9.8 percent.
As a result, operating profit EBIT slumped to 304 million Swiss francs from 1.19 billion in the previous year. This led to a margin of just 4.5 percent after 15.1 percent in 2023.
Less dividend
The bottom line was a net profit of CHF 219 million (-75%). Analysts had expected an average of 407 million.
With the slump in earnings, shareholders will also receive a lower dividend. Swatch intends to pay out 4.50 francs per bearer share. For 2023 it was 6.50 francs.
Swatch also attributes the massive decline in operating profit to the fact that "production capacities and jobs were deliberately maintained". The company speaks of a persistently difficult market situation in China.
No recovery in China
The sharp drop in demand for consumer goods in China and the Southeast Asian markets, which are heavily dependent on Chinese tourists, continued in the second half of 2024. Sales in these regions, which are important for the Group brands, fell by around 30 percent, according to the statement. China (including Hong Kong and Macau) accounted for 27 percent of total sales, compared to 33 percent in the previous year.
On the other hand, Swatch achieved record sales and market share gains in the USA, Japan, India and the Middle East - with the strongest growth in the Omega, Longines and Tissot brands. Tissot, for example, exceeded the 100 million US dollar sales mark in the USA for the first time.
In Japan, the Group achieved high double-digit growth rates. The Harry Winston, Omega, Longines and Tissot brands in particular have significantly expanded their positions.
Premium brands under pressure
In its outlook, Swatch is more confident about the further course of business: the company expects positive sales development in local currencies in 2025, based on good sales outside of China in December and planned product innovations in all price segments, it said. The Group expects "substantial" improvements in sales, operating result and cash flow in the new year.
Sales in December 2024 were "very positive". However, sales of the prestige brands were still down on the previous year. Overall, the US, Canada and some European countries such as the UK, the Netherlands and Belgium exceeded the previous year's sales by 20 percent or more in the last month of 2024, according to the press release.
Redundancies ruled out
The Group still does not intend to reduce production capacity and will not be making any redundancies, it emphasized. This will lead to a rapid improvement in earnings in 2025 with rising sales. Practically all markets worldwide are on a growth trajectory, he said, with only the greater China region experiencing problems with consumption.
In 2024, the number of employees decreased by 2.1 percent due to natural fluctuation. In addition, the Rivoli Group's eyewear business was merged with a partner in the Middle East. As a result, around 430 people were transferred to a new company in which Rivoli holds a minority stake. At the end of the year, Swatch employed just under 32,500 people.
The Group continued to invest in its own retail stores and production buildings in 2024. A total of 568 million was invested after 803 million in the previous year.
