Swatch Group has seen gigantic sales losses due to lockdowns in China. Apart from that, the business 2022 saved a mega idea.
The well-known Swiss watch company Swatch Group has lost about 700 million Swiss francs in sales due to the zero-covid policy in China with its strict lockdowns.
Excluding China, however, revenue in local currencies rose by a high 25 percent, the Swatch Group company said Tuesday.
Even profit increase
Net sales rose 4.6 percent at constant exchange rates to 7.5 billion Swiss francs. At current exchange rates, it was still up 2.5 percent. Almost all Group sales are generated in the Watches and Jewelry segment.
Below the line, the result for the past financial year is also impressive. Net profit increased by 6.3 percent to 823 million Swiss francs. The profit margin rose slightly by 0.4 percentage points to 11.0 percent.
50 percent drop in sales
It is hard to imagine if China had also flourished. Indeed, double-digit sales growth across the board in Europe, the Americas, the Middle East and most Asian markets was severely dampened by the significant sales decline in China.
Particularly burdened by this, according to the communiqué, was Q4 2022, in which first the lockdowns and – after the measures were lifted – the massive covid disease wave led to shortfalls in sales of more than 30 percent.
The decline in the month of December had even been around minus 50 percent, Swatch further bemoaned.
Double-digit growth in retail business, not only for the Swatch brand, but also for the Harry Winston, Breguet and Omega brands in particular.
Demand for the 11 Bioceramic MoonSwatch models remains high nine months after launch, with queues outside Swatch stores continuing to be commonplace.
Contagion on Speedmaster
Despite an additional 70 points of sale and greatly increased production, daily demand still far exceeds available products. The MoonSwatch is a best-seller, with over 1 million units sold. So that launch was a mega-idea.
The MoonSwatch was popular with an extremely wide range of customers of all ages and backgrounds, it was said, explaining this boom. According to the company, in the wake of the MoonSwatch hype, even the entire Speedmaster collection of the Omega brand, for example with the Moonwatch models, has benefited from greatly increased interest.
In view of the potential energy shortage and possible supply bottlenecks, the Group has decided to massively increase safety stocks – where possible.
This measure will also pay off in view of higher demand in China, following the move away from the zero covid strategy. A large part of the 484 million Swiss francs (or 7.6 percent increase) in inventories was seen in the categories of raw materials, work in progress and semi-finished products.
Swatch also increased its workforce. Compared with the previous year, the workforce increased by 617 (or 2.0 percent) to around 32,000.
Hong Kong recovers
Group Management expects strong sales growth in all regions and segments in 2023. Following the end of the covid measures, consumption has recovered rapidly not only in China but also in the surrounding markets of Hong Kong and Macau.
In addition, the lifting of travel restrictions in China will revive sales in tourist destinations. After all, Switzerland is suffering from the lack of tourists from China, as muula.ch has reported time and time again. So this is expected to change soon.
The sales increases in China in January 2023 further strengthen the Swatch Group’s expectation that 2023 can become a record year.
Hardly borrowed capital
The group around the Hayek dynasty always stands out anyway with its enormous equity capital of around 12 billion Swiss francs and a gigantic equity ratio of 87 percent.
The loss of revenue in China is not pretty, but in the end it does not play a major role for Swatch.