Swatch Forecasts Revenue May Return to Pre-Pandemic Levels

Swatch Group AG forecast a rebound from its lowest earnings in at least three decades, saying sales may return to pre-pandemic levels.

There’s a good chance revenue in local currencies will approach the levels seen in 2019, with significantly improved margins, as travel revives and production bottlenecks start appearing at brands like Blancpain and Omega, the companysaid Thursday. In China, sales have rebounded with double-digit growth as the country was among the first countries to emerge from lockdown.

Watchmakers have been among the hardest-hit luxury-goods makers during the pandemic because they have high fixed costs related to production. Profit tends to be volatile at such companies, because once they’re operating at full capacity again, the costs become much more manageable.

Now Swatch’s factories and workshops are gradually returning to full capacity again, boding well for a boost in profitability. Bottlenecks have appeared for some of its most popular brands including Longines and Tissot as demand rebounds. Last year Swatch also had acyber attack that interrupted production at Omega for 10 days.

Operating profit fell 95% to 52 million francs ($58 million) in 2020. Analysts expected 71.6 million francs. Excluding the Calvin Klein business that it’s discontinuing, profit was 99 million francs.

Swatch cut 10% of its jobs in 2020 as Chief Executive Officer Nick Hayek strayed from his usual policy of avoiding job cuts even during downturns. Most were related to store closures as the company permanently shut 384 shops. Hong Kong was a special focus, with the network there reduced to 38 from 92 as Chinese luxury spending returns to the mainland.

The company cut its dividend payments by 36% to 3.50 francs per bearer share and 70 centimes per registered share.

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