The Swatch Group has released its half year report for 2020.
The year started strongly with an operating margin of 21.4% in the Watches & Jewellery segment (without Production) and 17.3% for the overall Group despite COVID-19 lockdowns in mainland China in January. This was followed by the expected massive drop due to state-ordered closings of at times up to 80% of distribution channels worldwide, as well as the significant reduction in the production of watches and jewellery.
The Group reported its first loss, with net sales of CHF 2,197 million, down -43.4% to the previous year at constant exchange rates, or -46.1% at current rates. The strong Swiss Franc reduced sales by CHF 113 million, or -4.9%.
There has been a net loss of CHF -308 million, compared to net profit of CHF 415 million in the previous year.
The operating loss was CHF -327 million, compared to operating profit of CHF 547 million for the same period last year, but the month of June, in line with the easing of COVID-19 restrictions in many regions, saw a return to a positive operating result for the Group. Customer demand has been high in all price segments for regions no longer in lockdown, with double-digit growth in May-June in mainland China compared to 2019.
There was an acceleration of retail closures, with approximately 260 stores closing permanently in the first half of 2020, and a loss of 6.5% (about 2,400) employees down to approximately 33,700. The Swatch Group also announced the end of its 22-year-old contract to sell Calvin Klein watches effective October 2020, which has accounted for some of the closures. The Swatch brand will also increase its e-commerce focus.
At present, only about half of its employees in Switzerland have returned to work full-time, although the European summer break needs to be factored in as well. Last week, on average 6,000 employees were working part time, whilst about 2,500 were taking unused vacation or reducing overtime.
Overall, the Swatch Group expects a strong second half of 2020 based on a further easing of COVID-19 restrictions and new releases, with a positive operating result for the entire year.
For the full release of the half yearly report, including financial statements, click on this link.
Also, you may recall the recent announcement of managerial changes at some Swatch Group brands.
Following on from the May 2020 monthly report of Swiss watch exports, the June 2020 report is due soon and will no doubt be of interest.