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.

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.

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.