Swatch Group Sees Sales, Profit Sink in 2016

Bienne, Switzerland--Swatch Group reported a drop in net sales and income in 2016 amid a “very challenging economic environment” in which watch sales continued to decline.

In its full-year financial report released Thursday, the company said net sales were $7.58 billion, an 11 percent decrease year-over-year at both current and constant exchange rates.

Net income was $594.9 million, a 47 percent drop, while operating income was $806.8 million, which is a decrease of 45 percent over 2015.

The company said that 2016 was “marked by worldwide turbulence in a very challenging economic environment.”

The decrease in demand for watches, a trend which already was being seen at the end of 2015, intensified last year, particularly in the first half of the year, Swatch Group said, and the terrorist attacks in France, Belgium, Germany and Turkey, as well as new legal regulations in some countries, led to shifts in buying. 

The company added that the slightly positive trends in the U.S. dollar, Japanese yen and euro were “almost completely neutralized” by the weakening of the British pound that resulted from the Brexit vote last summer and the devalued Chinese renminbi, as well as the continued overvaluing of the Swiss franc.

Region-wise, Swatch Group said its sales in North America were down slightly, and sales dropped in Europe as well due to a decrease in the number of tourists. Sales in Middle (Central) America were up.

The company said that sales have normalized in Hong Kong in recent months, in both retail and wholesale. On mainland China and in the Middle East, positive demand in recent months has led to a double-digit growth.

Healthy growth in the Middle East and Asia is expected for 2017, as well as in the United States and Europe.

In 2017, Swatch Group said it will focus on new product launches from the company’s brands, including a new slim Skin collection and the second generation of the Swatch Bellamy as a contactless payment device.

The company also said it will launch smartwatches that run on its own Swiss-made operating system, according to a Bloomberg report, a move that will challenge systems like Android Wear from Google and the Apple Watch.

Tissot will introduce a model near the end of 2018 that uses the system and also will be able to connect to small objects and other wearables.