Swiss watchmaker Swatch Group is feeling the significant impact of the novel coronavirus outbreak, particularly in China where hundreds of stores have been temporarily closed. The company’s Chief Executive, Nick Hayek, stated that this has had a “massive” effect on the business. Despite this, Hayek reassured investors that Swatch Group remains financially stable and is not burdened by debt. He dismissed concerns over competition from lower-cost foreign rivals or digital smartwatches such as the Apple Watch, stating that the middle and upper segments of the company have experienced steady growth since 2010.
Hayek attributed the decline in exports of entry-level Swiss watches to other manufacturers focusing solely on the luxury segment, where they believe profitability lies. He also acknowledged that the rise of smartwatches, particularly the Apple Watch, has affected the mid-priced segment. In response, Swatch Group has reduced its distribution network by around 30% since 2015. Hayek admitted that the company should have embraced online sales sooner, but mentioned that they are on track to achieve over one million online sales this year.
In addition to the challenges posed by the coronavirus outbreak and competition from smartwatches, Swatch Group has also been impacted by the appreciation of the Swiss franc since the Swiss central bank removed its ceiling against the euro in 2015. However, Hayek stated that job cuts are not necessary for the company, except for a reduction related to the expiration of a license agreement for Calvin Klein watches in the lower segment.
Despite these challenges, Hayek remains confident that the Swiss watch industry is not in crisis. He stressed the importance of actual sales rather than just export data and expressed belief in the company’s ability to overcome the current difficulties.