The Swiss watch giant is aimed at growing pressure from the market and investors. There are more and more questions about the company's future and whether time has not caught up with its management. In the background a dispute over power, strategies and the sense of duration at old habits.
As reported by the Financial Times, SWATC's shares – the owner of 16 brands of watches such as Omega, Longines and Tissot – have fallen by 24 percent over the past 12 months. This is a continuation of the long -term inheritance trend – from the peak level of almost 600 Swiss francs in 2014 to 147.85 CHF, which gives a market capitalization of 7.7 billion francs.
These group results – net profit dropped by 75 percent to USD 219 million (USD 261 million) last year – they take part in partly with reduced demand from Chinese consumersdue to the general slowdown in the expenditure in the luxury goods segment.
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However, some analysts and investors say that many Swatch problems have their internal source.
Will the management open to changes?
Oliver Müller, founder of Luxeconsult, an advisory company for the watchmaking industry, stated that the Hayeks have been running Swatch as a family company, not a public company (Nick Hayek has been the general director since 2003, and his sister nayla is chaired by the supervisory board since 2010).
Investors, however, may soon force the family to take into account their expectations greater. Steven Wood, the founder of the American investment company Greenwood Investors, which has 0.5 percent of SWATCH shares, strives to choose to the Directors Council during the General meeting of Swatch on May 21.
This month, Wood said the “Financial Times” that Swatch is “managed only for one shareholder”, which was an allusion to the Hayek family, which has 25 percent Swatch and controls 44 percent of vote rights.
Great past, uncertain future
The Swiss watch industry owes a lot to the Swatch brand. The company from Biel, adopting quartz technology in the 1980s, helped make Swiss watches available to the masses and repel the existential threat from cheap manufacturers from Asia.
The company's founder, Nicolas Hayek, who died in 2010, is widely recognized as a person who transformed the Swatch brand into The global symbol of Swiss innovation and craftsmanship.
According to Michael Niedzielski, co -founder of Race Capital and former SWATCH shareholder, the current management lost this dynamics. Quoted by the “Financial Times” he said: “Communication with the investor community is weak and they do not accept any feedback.” He also added that “catastrophic” working capital management has exhausted free cash flows in the last decade.
The Swiss watch industry is struggling with new challenges after a pandemic boom
Swatch claims that analysts are invited to participate in conversations with management twice a year, and investors “very often” visit the company. The company also defends its working capital management, indicating that commercial receivables only corresponded to 31 days of delayed invoices at the end of December.
SWATCHA brands support almost every market segment. The group sells everything – from Breguet watches for 44,000 pounds, to Swatch models for 50 pounds.
However, the Swiss watchmaking industry records declines after a pandemic boom and faces new challenges in the form of duties in the USA and the influence of strong franc on the value of exports and profitability.
Caroline Reyl, head of the Premium brand department at PIESTET Asset Management, said that the only growing segment of the watches market is “Very high shelf” – i.e. Patek Philippe, Rolex and Audemars Piguet.
The sale of Breguet and Omega is falling while Patek Philippe is growing
Luxurious brands belonging to the Swatch group lose their importance towards competition. Jean-Shippe Betschy, head of the Swiss Action Action Department at the Vontobel bank, indicates that even 20 years ago, both Ptek Philippe and Breguet generated an annual sales of $ 300-400 million.
Since then – according to Vontobel's estimates – Sales of Patek Philippe, which is an independent brand outside the Swatch group, has increased about seven times and today reaches almost $ 2.3 billion. Meanwhile, the sale of Breguet, which is one of the most prestigious brands in the SWATCH portfolio, fell by almost half – to $ 221 million a year.
The situation is similar in the case of Marek Omega and Longines, which also belong to the Swatch Group. According to vontobel data, the sale of Omega and Longines watches has fallen – 20 % respectively. and 29 percent – in 2019–2024.
“There is no other company in the watch industry that has experienced such a large decline in sales in recent years,” says Betschy. He adds that “investors really start to lose patience.”
SWatch said that the “Financial Times” should not “listen, rely or trust analysts.”
Swatch uses production advantage, but analysts call for refreshing their luxury brands
Swatch still has some structural advantage over the competition. Has over 150 production plantswhich produce almost all components used in his watches and in the watches of other manufacturers. Another group from the group, Micro Crystal, is also considered a leader in the production of quartz crystals used in watches and smartphones.
There were also several successes in innovations. The last cooperation between Omega and Swatch at the Moonswatch collection – popular, colorful and affordable watches – increased sales.
However, analysts call the company to refresh other brands to capture part of the relatively resistant market of luxury goods. Breguet, which currently generates losses, is perceived as a neglected brand, but with great potential due to the 250-year history and relationships with European monarchs, such as Maria Antonina or Napoleon Bonaparte.
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