Swatch Group AG, the Switzerland-based watchmaker, reported lower-than-anticipated revenues for 2023, falling short of its CEO’s sales record projection. The company, known for luxury brands like Omega and Longines, generated 7.9 billion Swiss francs ($9.1 billion), not meeting the 8 billion francs anticipated by analysts.
In early Zurich trading, Swatch shares declined by 3.5%, reaching their lowest in over three years. CEO Nick Hayek had optimistically predicted in the previous year that 2023 sales might surge to a record 9 billion francs, buoyed by the return of Chinese consumers post-pandemic. China, a crucial market for Swatch, contributes up to 40% of its sales.
Hayek, in a recent interview, expressed mixed sentiments about the Chinese market, noting a particular concern among younger consumers. This unexpected trend in China has partly contributed to the company’s shortfall.
Impact of the Strong Swiss Franc
The company highlighted the impact of the strong Swiss franc, which eroded 554 million francs from their sales. Despite aggressive price hikes in certain markets, the rapid depreciation of major currencies against the Swiss franc presented a significant challenge.
Swiss watch exports are on track to reach a new high in 2023. However, industry rivals, including Richemont, have reported slowing demand in recent times, a shift from the surge experienced during the Covid-era.
Product Collaborations and Performance
Swatch’s collaboration strategies, such as the partnership between its Swatch brand and the high-end Omega marque which sold over 1 million MoonSwatches in 2022, continued with a new version of the Blancpain Fifty Fathoms. This collaboration boosted Blancpain’s store sales by over 25%, but meeting demand for certain models remained a challenge.
Financial Highlights and Analyst Perspectives
The company witnessed an 8.1% increase in net income, reaching 890 million Swiss francs, though this was below the 979 million francs forecast by analysts. According to Jefferies analysts, the growth was predominantly in lower-priced segments. They also expressed concern about the company’s cautious stance on currency fluctuations in 2024 and its potential industry-wide implications.