Economic Tensions Take Toll on Swatch Sales

Biel/Bienne, Switzerland—Swatch Group posted lower-than-expected full-year results as trade and economic tensions weighed on sales in Asia and France.

In its annual report, the Swiss watch company reported sales rose nearly 6 percent to 8.48 billion Swiss francs ($8.54 billion) compared with the 7.98 billion Swiss francs ($8.03 billion) reported in 2017.

Its watches and jewelry segment, which includes brands like Tissot and Longines, accounted for 8.21 billion Swiss francs ($8.26 billion) of the total.

Net profit for the year rose nearly 15 percent to 867 million francs ($872.33 million), ahead of the 755 million ($759.64 million) Swiss francs in 2017.

Still, the results fell short of the 8.65 billion francs ($8.70 billion) in sales and 952 million francs ($957.86 million) in profit that Reuters analysts had expected. Its 8 francs ($8.05) per share dividend was also lower than analysts had forecasted.

Looming fears of a trade war coupled with a slowing Chinese economy took its toll on sales of luxury watches both in China and when its residents traveled abroad.

“High growth rates were achieved again in Asia, both in wholesale and in the group’s own retail including e-commerce, although a downturn in demand occurred in the last three months of the year, particularly in wholesale,” Swatch said in a statement.

The company saw positive growth in Japan and North America, but Europe was a bit more complicated. While Great Britain and Switzerland increased sales, France’s “yellow vest” protests, fueled by the belief that the French government’s economic policies favor the rich, cut into end-of-year sales.

Looking ahead, Swatch plans to turn the year’s lemons into lemonade, forecasting that “China will become a major opportunity for the group in 2019, even if ongoing market turbulence remains disruptive.”

The company said 2019 has started off on a high note, experiencing solid growth in the month of January.

In its jewelry segment, Swatch pointed to Harry Winston as a brand gearing up for strong growth in 2019, following its $50.37 million November purchase of the Pink Legacy, an 18.96-carat fancy vivid pink diamond once belonging to the billionaire Oppenheimer family behind De Beers.

In the watch division, the company has high hopes for Blancpain’s Fifty Fathoms collection as well as Omega’s products celebrating the 50th anniversary of the moon landing and the brand’s special edition “Minus 1” collection, launching in the second half of 2019 ahead of