Swatch Group: half-year report 2020

The Swatch Group released its financial report for the first half of 2020.

The Swatch Group released its financial report for the first half of 2020.

The year started well for the Group that in January recorded an operating margin of 21.4% in the Watches & Jewelry segment (without Production) and 17.3% for the entire Group.

Massive decline occurred as of February due to state-ordered Covid-19 measures imposed around the globe that impacted the Group with the closings of at times up to 80% of distribution channels worldwide (Group stores and third-party stores). Only e-commerce distribution was partially feasible. Production of watches, jewelry and components was reduced to a minimum, and short-time work was introduced for a significant number of employees. Inevitably, the Covid-19 emergency resulted in a half-year loss, a first in the history of Swatch Group.

The Group net sales were CHF 2,197 million, -43.4% to the previous year at constant exchange rates, or -46.1% at current rates.

Lower sales brought to an operating loss of CHF -327 million compared to operating profit of CHF 547 million in the previous year.

In this period, the Group achieved significant cost savings in the areas of purchasing, production, marketing, and rents while leaving unchanged the areas of research and development as well as training.

Customer demand for Group products continues to be strong, both in the prestige and luxury segment as well as in the middle and lower price segment. However, this demand could not be satisfied since the majority of distribution channels worldwide were forced to close.

The following examples of a market with full lockdown (China) show strong growth after the end of the lockdown period, first in the Group’s retail, followed by a delay in wholesale.

The bar graph above shows that the Group's retail sales declined more than 80% during the lockdown but immediately recovered after the reopening. The months of May and June show an increase of more than 60% over the the strong previous year.

Domestic wholesale experienced a decline of over 80% during lockdown and a delayed recovery compared to retail sales. Nonetheless, June 2020 performed better than June 2019.

The Group’s management is convinced that the sales and profit situation will improve quickly in the coming months, parallel to the further easing of Covid-19 measures in the countries. The positive outlook is strengthened by the new products that will be launched in the second half of the year, as well as the lower cost base. This will lead to increased production capacity in the third and fourth quarter 2020. A positive operating result is expected for the full year. swatchgroup.com