ZURICH (Reuters) – Swatch Group on Thursday reported its first annual loss since the early days of the Swiss watchmaker almost 40 years ago as the COVID-19 pandemic battered demand in the luxury sector.
The company posted a net loss of 53 million Swiss francs ($60 million) for 2020, its first loss since 1983 – the year Swatch Group was set up in its current form and launched the Swatch plastic watch.
Lockdown restrictions that shuttered shops and drastically reduced international travel battered sales of the Biel-based company, which also sells pricier Tissot, Longines and Omega timepieces.
Swatch Group, like other watchmakers, was also hit by the political unrest in Hong Kong, which dramatically reduced the number of Chinese tourists to the territory during the year.
Peer Richemont posted a 14% drop in sales at constant currencies for the nine months to Dec. 31, but grew in the Christmas quarter thanks to strong jewellery sales.
Unlike Richemont, Swatch Group can’t fall back on a jewellery business and its entry-price Swatch and Tissot brands are vulnerable to competition from smartwatches like the Apple watch.
As a result, Swatch Group 2020 sales fell by almost a third to 5.59 billion francs. The 32% decline was worse than the 22% fall reported by the Swiss watch industry overall.
The company proposed cutting its dividend, slashing its 2020 payout for the more frequently-traded bearer share to 3.50 francs from 5.50 francs a year earlier.
Still, Swatch – famous for its optimistic view of the market – flagged signs of recovery.
China, the world’s biggest market for luxury watches, saw double digit growth in the second half of 2020, while the United States saw sales reach pre-pandemic levels in December, Swatch said.
“For 2021, the Group sees a good chance that sales in local currencies will approach those of 2019, with significantly improved margins,” it said.
“Group Management anticipates a strong catch-up in consumption worldwide for watches and jewelry in 2021, as has already been observed in mainland China after normalization of the health situation.”
Despite the upbeat outlook, Swatch shares were indicated to open 2.5% lower in pre-market activity.
“We also expect a turnaround in FY21 but consider the outlook to be very optimistic,” said Rene Weber, an analyst at Bank Vontobel.
Source: Read Full Article