Swatch Group voices concerns over uncertain Hong Kong outlook
Swatch Group yesterday warned of an uncertain outlook for its major market Hong Kong after reporting an 11.5 per cent fall in first-half profit.
Swatch Group yesterday warned of an uncertain outlook for its major market Hong Kong after reporting an 11.5 per cent fall in first-half profit.
Chief executive Nick Hayek said he was concerned about the situation in the city, where pro-democracy protesters have clashed with police in past weeks.
"There's a lot of uncertainty because of this … conflict. Fewer people visit Hong Kong and our stores there. But the main problem is with wholesale. Retailers are worried and buy fewer watches. This uncertainty will persist for some time," Hayek said.
Retailers are worried ... this uncertainty will persist for some time
Hong Kong accounted for nearly 20 per cent of total Swiss watch exports in the first half, worth about 2 billion Swiss francs (HK$17.2 billion). Last year, Swatch's sales to Hong Kong, the mainland, Macau and Taiwan totalled 3.2 billion francs, 38 per cent of the group's sales.
Swatch, the world's largest watchmaker, has already been grappling with sluggish demand in the mainland market, where a crackdown on gifts for favours has hurt watch sales.
Barclays analysts said of Hong Kong: "Given that this a high-margin and important region for the sector and has seen weaker retail sales data recently, this may be a focus today."
Swatch shares, which have underperformed its rivals with a 13 per cent drop this year, were down 1 per cent on Monday.
The firm expects margins and sales to recover in the second half as the negative impact from the strong Swiss franc wanes and demand in the United States and Japan holds up.
"Our watches and jewellery sales rose at a double-digit pace in local currencies in July and we expect that trend to continue in the second half," Hayek said.
He said demand in Europe was still sluggish, but the US and Japan were robust. The mainland also picked up, with Swatch and Harry Winston brands doubling their sales and Omega returning to growth, while high-end Breguet still struggled.
Swiss watch exports overall rose 1.4 per cent last month and 3 per cent in the first half, data showed. Exports to Hong Kong in fell 2.2 per cent last month.
