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Swatch Group Sees Growth Ahead Despite Half-Year Sales Dip
The watch company expects an uptick in the second half of the year due in part to its crackdown on gray market sales.
The Omega 38 mm Seamaster 1948 Central Seconds, which was released at Baselworld 2018 ($6,400). Swatch’s brands performed well in its key markets and online, said the company in its recent half-year results.
Biel/Bienne, Switzerland—Swatch Group reported a dip in sales in its half-year results Wednesday but said its crackdown on gray market sales should lead to an uptick in the second half of the year.
Group net sales were down 4 percent year-over-year at current and constant exchange rates to 4.1 million Swiss Francs ($4.1 million) in the first six months.
Protests in Hong Kong spurred by political unrest weighed on sales, leading to a double-digit decline in a major market.
The watches and jewelry division, which includes brands like Longines and Tissot, accounted for 3.9 million Swiss Francs ($4 million) of total net sales.
Net income fell 11 percent to $415 million Swiss Francs ($420 million) while the operating margin dipped to 13 percent from 15 percent in the first of 2018.
The company reported growth in the key markets of mainland China, Japan and the U.S. in all price segments. Its e-commerce segment also performed well, Swatch said.
Going forward, Swatch said it expects “strong growth” in the second half of the year due to strong demand in its major markets and a comparison to a weak second half of 2018, which was dragged lower by a disappointing fourth quarter.
The company also said it has been cracking down on gray market dealers in Europe, the Middle East and South America.
RELATED CONTENT: Is the Gray Market Slowing Down?Swatch stopped supplying watches to dealers who sold their watches outside of the approved markets, which cost hundreds of millions of francs in lost sales.
The company expects the decision to lead to positive effects in the major markets in the long-term.
“The news on tackling the gray market is really encouraging—you need to create the appearance of scarcity in luxury goods, otherwise they become commodities,” said Jon Cox, an analyst at Kepler Cheuvreux, in an interview with Reuters.
The company said the launch of new products across all price segments also is expected to boost sales, leading to positive sales growth for the full year compared with the previous year.
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