The Swatch Group’s Financial Report For The First Half Of 2016 Net Profit Drops 52.0% Yoy

On July 21, 2016, the Swatch Group released its financial report for the first half of 2016.

· Based on current exchange rates, the Swatch Group’s net sales in the first half of 2016 reached 3.716 billion Swiss francs, a year-on-year decrease of 11.4%; at constant exchange rates, net sales decreased by 12.5% ​​year-on-year to 3.666 billion Swiss francs.
· Based on current exchange rates, the Swatch Group’s watch and jewelry division (including manufacturing) saw a net sales decline of 11.3%.
· Double-digit growth in retail sales in Mainland China and Southeast Asia.
Hong Kong: The decline in retail sales has bottomed out, and wholesale sales are still in trouble.
Operating profit was 353 million Swiss francs (9.5% of net sales), a 53.6% decrease from the same period last year. The main reasons are additional exchange rate changes, lower production utilization rates, and the Group’s long-term strategy of maintaining investment in hiring employees, innovative products and marketing.
· Watch and jewelry division (including manufacturing) operating profit accounted for 11.2% of net sales.
Net profit (263 million Swiss francs) decreased by 52.0% compared to last year (548 million Swiss francs). Net profit margin was 7.1%.
· Thanks to the verticalization of local production bases, Swatch Group has obvious advantages in achieving “Made in Switzerland” (production costs in Switzerland must reach 60%) in 2017, and in order to meet future demand for Swiss-made products Inventories have also increased accordingly.
· Harry Winston developed strongly in the first half of the year, setting a record in June.
· The Chinese mainland market has improved significantly. Compared with the same period last year, the development trend in the first three weeks of July was positive, especially luxury brands and famous brands such as Breguet, Blancpain, Glashütte Original, Omega and Longines.
· Favorable changes in the exchange rate of the British pound have enabled the British Swatch Group retail stores to make a strong start in July. There are clear signs of recovery in tourism sales in some parts of Europe, mainly Spain and Italy. In addition, Omega’s participation in the Rio de Janeiro Olympics will also generate further positive incentives. Overall, the Group is expected to usher in a stronger second half of the year.
Outlook for the second half of 2016
   The Swatch Group expects that in the second half of 2016, it will achieve significant growth (in local currency terms) compared to the weakness in the second half of 2015, so the results throughout the year will be closer to or even comparable to last year. The Swatch Group has a unique brand portfolio that spans the world’s retail and distribution networks. Looking forward to development prospects, all regions and price segments are still improving. In the medium and long term, opportunities far outweigh risks.
   Compared with the same period last year, the Chinese mainland market achieved good growth in the first three weeks of July, especially luxury brands and famous brands such as Breguet, Blancpain, Glashütte Original, Omega and Longines. The development of the Southeast Asian market is also very impressive. In addition, parts of Europe, especially Italy, Spain and the UK, have also achieved positive development. The French and Belgian markets will remain in trouble. In the coming months, the normalization of the tourism industry will become a decisive factor for the further positive development of parts of Europe and the Chinese market. On the other hand, third-party distributors in Hong Kong are still upset, which will lead to further delays in reordering. As for the North American and Japanese markets, growth in local currencies is achievable.
   The Rio de Janeiro Olympics in Brazil will increase the popularity and influence of the Omega brand worldwide. Omega is not only the official timekeeper of the Rio Olympics, but also launched nine special edition watches for this purpose. In the second half of 2016, Omega will also officially launch the new Seahorse series Ocean Universe ‘Deep Ocean Black’ watch and the Speedmaster series Moon Phase Zhizhen Observatory watch.
   The Tissot brand is currently participating in the Tour de France, serving as the official timekeeper of the race, and has launched a new T-Race Tour de France special watch. By establishing a partnership with the NBA and WNBA, Tissot will gain greater international visibility. In particular, the brand has also released a new NBA series watch and Ballade Silicium Chronometer watch, which is also the first in the industry to be equipped with a silicon balance spring. Watches under 1,000 francs. Longines will further expand its position in the Asian market with its new Riders and Rondo watches. Since July 7, Swatch has begun to release the Touch Zero Two watch which integrates fun, fitness and timing functions; by September, the new Sistem 51 Irony watch will be officially launched.
   Long-term marketing investment, huge retail network, and abundant new products in various price segments will give strong support to all brand sales. There is no structural change in the production base, and the enthusiasm of all employees has also enabled the Swatch Group to quickly meet growing demand. The highly vertically integrated manufacturing chain and production base in Switzerland make the new rules of adding the “Made in Switzerland” label (production costs in Switzerland reach 60%) a unique home advantage for the Swatch Group.