Swatch (UHR.CH) is up nearly 1% after the Swiss watchmaker signaled a recovery in the Chinese market, one of the company's key geographic sales centers. However, the share price gains are limited, as Q2 results fell short of expectations. Investors are reacting to positive comments about the future, but the current results do not allow for a lasting change in sentiment around the company.
It appears that some in the market have concluded that the comments regarding the key market may have prompted bearish investors to reduce short positions, which remained high in the run-up to the results announcement.
Key findings:
- The company has indicated that the decline in demand for luxury watches in China has bottomed out and will rebound in the second half of the year.
- The company reported a worse-than-expected decline in sales and operating profit.
- While high inventories at retailers have previously been a problem, the company now forecasts that these will decline significantly in the second half of 2025.
- In the first half of the year, Swatch reported a worse-than-expected sales decline of 7.1% in China, including Hong Kong and Macau.
- On the other hand, Swatch recorded double-digit sales growth in regions such as North America, India, and the Middle East, despite data from the Federation of the Swiss Watch Industry indicating a significant decline in exports to the US in June.
- The entire Swiss watch industry has seen a decline in exports in recent months due to the strengthening of the Swiss franc and growing doubts about the health of the entire luxury sector.
Swiss Watch Export Report for June 2025. Source: Federation of the Swiss Watch Industry
FIRST HALF-YEAR RESULTS
- Operating profit CHF 68 million, -67% y/y, forecast CHF 142.5 million
- Operating profit from watches and jewelry CHF 127 million, forecast CHF 197.5 million
- Electronic systems operating profit CHF 3 million, forecast CHF 4.83 million
- Operating margin 2.2% vs. 5.9% y/y, forecast 4.9%
- Watches and jewelry operating margin 4.4%, forecast 6.57%
- Electronic systems operating margin 1.7%, forecast 3.26%
- Net sales CHF 3.06 billion, forecast CHF 3.2 billion
- Watches and jewelry sales CHF 2.89 billion, forecast CHF 3.04 billion
- Electronic systems sales CHF 171 million, forecast CHF 145.5 million
- Sales at constant exchange rates -7.1%, forecast -4.35%
Secondary market demand for Omega watches (a Swatch brand) remains the lowest since 2021, when the market price peaked. Source: Chrono24
The company's shares are in a deep downtrend and are currently hovering near their lowest levels since 2009. Source: xStation
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