Business News – Swatch Group 2016 Results Worse Than Expected / Net Sales Drop Over 10%, Net Income Drops 47%

For more than 2 years now, the watchmaking industry is facing a “crisis” or at least, sales and profits are lower than in the 2000s, the golden era of modern watchmaking. After Richemont announced massive shakeups and rather bad results, it’s now time for Swatch Group to make public the results for the year 2016… and they’re not good. Sales are decreasing over 10% (compared to 2015), operating result plunges of close to 45% and the net income is almost half of what it has been in 2015 (which was already not the best year the industry has seen).

Here are the key figures for Swatch group in 2016:

• Net sales of CHF 7,553 million for the Group, at current exchange rates, a decrease of 10.6% (or a minus of 10.8% at constant exchange rates). Net Sales were CHF 8,451 in 2015.
• Operating result of CHF 805 million, equivalent to an operating margin of 10.7% (minus 44.5% compared to previous year). Operating result was CHF 1,451 in 2015.
• Net income of CHF 593 million, equivalent to a net margin of 7.9% (minus 47.0% compared to the previous year). Net income was CHF 1,119 in 2015.

Swatch Group CEO, Nick Hayek – Photo: Gianluca Colla/Bloomberg

Now that these results are given, it must also be said that the end of the year 2016 however shows signs of recovery, or at least of a “slower decrease“. Indeed, the Watches & Jewelry segment, including Production, shows a recovery. Compared to the first half year, “operating margin improved by 2 percentage points in the second half, despite massive shortfalls in purchase and order volumes of watch movements and components from third-party customers, and maintaining of capacities and workforce in production facilities”. Also, the months of November, December and January showed, particularly in Mainland China, very good growth in the Watches & Jewelry segment, with a substantial improvement in operating margin. Based on this, the Swatch Group expect a healthy growth for 2017 and the year 2016 could be the lowest point of the decreasing sales’ graphics.

What to expect for 2017? Swatch Group claims that “consumer interest and the potential for Swiss watches remains strong. Particularly Asia and the Middle East are showing again increasing sales in recent months, including brands in the luxury segment“. Innovation is still a huge part of the Group’s strategy (remember that Swatch Group is first of all a production and industrial tool, which happens to make watches), as “the number of patent applications in the year under review again exceeded 180 patents, in the areas of electronic smart and mobile device products, mechanical watches and watch movements, as well as in «habillage» and for innovative production methods“.

Finally, in its press release, the Swatch Group shed the light on the “60th anniversary of the Omega Speedmaster“, something that will augur interesting collections for Omega collectors.

Source: Swatch Group