Luxury Swatch CEO surprised by sharp drop in demand in China

Swatch CEO Nick Hayek was surprised by the sharp decline in demand in China in the first half of 2024. As a result, the Group generated 14 percent less turnover and even 70 percent less profit after the previous year's records. However, redundancies are not an issue.

"In China, together with Hong Kong and Macau, we suffered a drop in sales of around 30 percent," Hayek said in an interview with the news agency AWP on Monday. "We had not expected such a sharp decline at the beginning of the year."

The reason for this is that consumer sentiment in China is suffering from the crisis on the real estate market, for example, and has also deteriorated in view of the increasing unemployment among the young population. Brands from the Group's luxury segment, such as Blancpain, Breguet and Omega, were particularly affected by the decline.

"In the luxury goods sector, people in China are waiting before they spend their money on an expensive watch or jewelry," said Hayek. The market situation in the "Middle Kingdom" will remain difficult for the entire luxury goods industry until the end of the year.

Swatch watches are selling well

In contrast, sales of brands in the lower price segment have developed better in China. The Swatch brand has even been able to increase sales by 10 percent, explained Hayek.

Hayek now assumes that the market situation in China will improve in the second half of the year, partly because the targets from the previous year are no longer at quite as high a level as they were in the first half of the year.

No redundancies

The good business in many other countries around the world and, according to Hayek, the still very good long-term prospects for the watch industry are preventing the Swatch Group from taking any drastic measures. "We have not cut any jobs or introduced short-time working," said the Group CEO.

This is because Swatch wants to maintain production capacity in order to be able to respond quickly to rising demand. The Group has also not made any cuts in marketing. "We are currently in a lean period that we will go through," said Hayek.

The Swatch boss is confident about the developments in June. The operating profit margin had already recovered to over 15 percent. In the first half of the year as a whole, it had slipped to 5.9 percent from 17.1 percent in the first half of 2023.