Swatch Group Profits Slump 75% in 2024, Dragged Down by China

Lily Templeton
·3 min read

PARIS — Skittish Chinese consumers at home or abroad dragged down the Swatch Group: The Swiss company’s 2024 net income dropped 75 percent to 219 million Swiss francs, or $242 million at current exchange rates.

Revenue for the full year came in at 6.74 billion Swiss francs, or $7.43 billion, down 12.2 percent against 2023’s figures at current exchange rates. It came in short of a consensus forecast of 6.98 billion Swiss francs, or $7.7 billion Swiss francs.

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Foreign exchange variations had a 192 million Swiss francs impact, while Swatch’s operating profit totaled 304 million Swiss francs, a quarter of what it was in 2023.

In midmorning trading, Swatch shares were down more than 5 percent to 153.45 Swiss francs, or $169.21 at current exchange rates.

In a research note, Bernstein senior analyst Luca Solca described the fiscal year’s results as going “from bad to worse.”

In his opinion, the group’s woes could be attributed as much to “a depressed global watch market after the post-COVID-19 watch binge” and high exposure to China as to the company maintaining high capacity levels that had an impact on operating leverage and “an abysmal financial market communication approach.”

Solca further called Swatch’s stock “borderline uninvestable” given the firm’s lack of clear financial communication, and suggested the company may be taken private.

Published separately on Thursday by the Federation of the Swiss Watch Industry, annual exports of Swiss-made timepieces totaled 25.9 billion Swiss francs, a 2.8 percent dip compared with 2023 that reflected the Chinese slowdown.

Swatch Group continued to attribute its decline in sales for the full year to the sharp drop in demand for consumer goods in Greater China, which includes the Hong Kong and Macau special administrative regions, as well as Southeast Asia, due to the drop in Chinese tourists.

It noted its operating margin, which stood at 4.5 percent against 15.1 percent last year, was dragged down by the production segment, where “deliberately maintaining production capacities and jobs led to a strongly negative operating result.”

Its watch and jewelry division ended the year with a 10.6 percent margin, recording 12.2 percent for the fourth quarter and 14.1 percent for December. Here too, deliberately maintained marketing investments such as those for the 2024 Paris Games, were highighted.

Overall, the group stated it saw “record sales and market share gains” in the U.S., Japan, India and the Middle East. Omega, Longines and Tissot grew strongest, with the latter passing the $100 million mark in sales in the U.S. for the first time, Swatch noted.

Meanwhile, the market situation remained “persistently difficult” with weak demand for consumer goods in Greater China. The area shank to 27 percent of the company’s total sales, against 33 percent in 2023.

Sales across Greater China and Southeast Asia slumped 30 percent.

Its production division saw a decline in orders, both from third parties and Swatch Group brands, but said it would stick to its strategy of preserving production capacity and avoiding reduncies as it would “lead to a rapid improvement in the result for the segment in 2025, if sales improve.”

“And all the more so since practically all markets worldwide are on course for growth, and issues with consumption are only being seen in the Greater China region,” it added.

The outlook for 2025 was positive with expectations for substantial improvements with respect to sales, operating result and cash flow,” it stated.

Swatch Group said the year promised “positive momentum worldwide,” buoyed by good sales reported in December outside of China and a raft of planned product releases.

Although it expects demand in China to continue being “rather restrained,” it views the change in consumer habits and behaviors there as opening “plenty of new opportunities for the strongly positioned brands.”

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