Swatch Cuts Jobs, Closes Stores as Sales Slump

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Swatch Cuts Jobs, Closes Stores as Sales Slump

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We're living in scary times for a lot of people around the world with closures, re-openings, and re-closings going on due to covid-19, and Swatch is in trouble, like so many other companies, and is trying to hang on until things return to normal, if that ever happens. Let's hope they're right about the second half of the year, and that it will pull them and other struggling companies through. Image

Swatch Cuts Jobs, Closes Stores as Sales Slump
By Lenore Fedow
lenore.fedow@nationaljeweler.com
July 15, 2020


Image
The Omega 38 mm Seamaster 1948 Small Seconds. Swatch Group, which owns Omega along with Rado, Longines and more, is cutting jobs and closing stores after COVID-19 lockdowns hurt sales.

"Biel/Bienne, Switzerland—Swatch Group will eliminate 2,400 jobs, about 6 percent of its workforce, and close 260 stores as part of a downsizing amid the COVID-19 pandemic.

In the first half of the year, Swatch’s net sales plummeted 43 percent year-over-year at constant exchange rates to 2.19 billion Swiss francs ($2.34 billion).

A strong Swiss franc worked against Swatch, reducing sales by 113 million Swiss francs ($120.4 million), noted Chief Financial Officer Thierry Kenel in a video shared by Swatch about its results.

The Swiss watchmaker said it was off to a strong start in January, but saw its momentum halted after COVID-19 forced the closure of up to 80 percent of its distribution channels.

It swung to a loss in the six-month period ending June, posting a total net loss of 308 million francs ($328.1 million) compared with a net profit of 415 million francs ($442.2 million) in the previous year.

The company reported an operating loss of 327 million francs ($348.4 million), which was twice as much as analysts had expected.

While sales in China fell as much 80 percent year-over-year in certain months, sales in the United States did not reach the same lows.

“The reason being was the online business, which we have built up over the past year,” Chief Controlling Officer Peter Steiger said in the video.

Online sales in the U.S. “reached one record after the other” during lockdown.

The in-store rebound started in May, but was halted one week later by protests in the wake of the death of George Floyd, said Steiger.

The second half of June is when in-store business “really took off again,” he said, with continued improvement seen in the first two weeks of July.

Omega was the “star performer” of its brands while Swatch also performed well.

Swatch Group had begun lowering its store count even before COVID-19 took hold, with a particular focus on Hong Kong.

“There are nearly no sales in Hong Kong at the moment,” CEO Nick Hayek said in the video, citing ongoing political unrest in the region alongside the impact of the coronavirus.

Swatch’s licensing agreement with Calvin Klein, in place since 1997, ended in October 2019 and many of the 260 store closures were a result of that decision, said Hayek.

Swatch contacted Calvin Klein parent company PVH Corp. to determine which company would take over these stores, said Hayek, but there was no response so the stores were closed.

The 2,400 job cuts were made mostly at its retail stores rather than at its production facilities.

Meanwhile, in Switzerland only about half of Swatch’s employees are back to work full-time, said Steiger, with around 2,500 taking unused vacation or reducing overtime.

Another 6,000 were on short-time work, a social safety net program where companies can apply for the government to subsidize workers’ salaries.

Swatch said 170 million francs in insurance went toward keeping its employees onboard with 150 million of that going to its Swiss manufacturing segment.

The partial unemployment measures are expected to end in the third quarter as manufacturing returns to full capacity, said Steiger.

Looking ahead, Swatch is expecting a strong second half of the year as restrictions are lifted and more stores begin to reopen.

The watchmaker will introduce new products to bolster its second-half sales, including new “James Bond”-edition Omega watches, a Tissot Connect smartwatch, and the ... "

https://www.nationaljeweler.com/majors/ ... ales-slump
PinkDiamond
ISG Registered Gemologist


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