Nick hayek swatch group

Swatch Group predicts rapid rebound as economies reopen

Chief executive Nick Hayek forecasts strong full year profit after “catastrophic impact” of the first six months.

Swatch Group is seeing rapid rebounds in countries that have reopened their economies after the peak of the Covid-19 pandemic.

Mainland China, the group’s biggest market, was back to growth of 11% in May and 13% in June, following what chief executive Nick Hayek describes as the “catastrophic impact” of the virus when turnover dropped year-on-year by 84% in February, 52% in March and 26% in April.

In a video address today, Mr Hayek showed his appreciation for countries that did not adopt a full lock down of their retail sectors by highlighting how much less sales had dropped in South Korea over the same period where the only negative month was March, with a dip of 10%. By June, YoY growth was back to 34%.

Peter steiger swatch group usa presidentPeter Steiger, a member of Swatch Group’s management board and president for the group in North America, said the experience in the United States was similar to China’s, but the crisis hit later in the year after double digit growth in January and February gave way to a slump in March, April and much of May.

The drop was not as sharp in the United States, Mr Steiger explained without revealing figures, because ecommerce sales doubled during lock down, and continued on a similar trajectory even as most states have reopened.

There was also a secondary hit to sales, just as they were recovering towards the end of May, as Black Lives Matters protests closed retailers in key cities.

Commenting on the dramatic rise in ecommerce, particularly for brands like Swatch, Omega, Longines and Tissot, Mr Steiger said: “Ecommerce is only going in one direction: up. We are guiding the group out of physical distribution.”

The number of stores around the world owned and run by Swatch Group has dropped from over 2,000 to around 1,800, although most of the 180 closures have been Swatch and Calvin Klein stores.

The management presentation came as Swatch Group announced a drop of 46.1% in global sales for the first six months of 2020 to CHF 2.2 billion.

Profits were down by just 14.9% thanks to cost-cutting measures associated with the closure of owned stores and a slow down in manufacturing for both components and finished watches. In Switzerland, 6,000 employees out of a total of 23,000 were on reduced hours and pay.

Mr Hayek gave an upbeat forecast for the remainder of the year, and predicted a full year profit. “The world will not be the same, but it will be full of opportunities,” he says.

Having suspended the vast majority of new watch launches during the pandemic, he signaled that these will resume and bring “energy and interest” to the market.

“There have been no novelties, no events, no advertising. These will resume in the second half,” he promises.

“We have a long term strategy and we are looking forward to a very strong second half,” he concludes.

Swatch Group shares were broadly unmoved by the half year results and commentary, ticking up this morning by 1% and largely unchanged since early April.

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