Swatch Group cites drop in European tourism for sales and profit decline

INTERNATIONAL. Swatch Group has said the impact of terrorist attacks on European tourism contributed to an -11% drop in group sales in 2016, to CHF7.55 billion (US$7.55 billion).

The watches brand owner said general tourism numbers, particularly those travelling from China, were significantly down on 2015, contributing to a net year-on-year sales decrease of -10.7% in its core watches and jewellery segment (to CHF7.31 billion or US$7.29 billion).

Swatch – which owns brands such as Longines, Tissot and Omega – reported a -47% drop in net profit to CHF593 million (US$591 million) year-on-year.

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In last week’s results announcement Swatch noted “tourists were largely absent” following the terrorist attacks in France and Belgium. Germany and Switzerland also experienced a reduction in sales, while trading in Italy and Spain was described as “relatively stable”.

The drop in Chinese visitors to Europe was attributed to new statutory entry requirements for biometric visas, while sanctions by Europe and the USA against Russia were said to have led to “a massive reduction” in visitors from that region.

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But what about the positives?

Swatch Group said last summer’s Brexit decision led to double-digit sales growth in local currency in the UK, although at a lower margin. South Korea, Mainland China, Indonesia and Malaysia all reportedly performed well, while sales in Japan have been “on an upward trend in recent months”.

The group noted that markets in the Middle East recorded double-digit growth, India remained stable and the USA performed positively. Overall, the organisation expressed confidence about sales in the year ahead.

Swatch also remains positive about growth from its development of electronic smart and mobile device products, which includes the imminent launch of the second generation of the Swatch Bellamy as a contactless payment device.

“Based on the positive sales figures in all segments in recent months, including January, Swatch Group anticipates healthy growth in 2017.”

Tourism projections for 2017

Multiple surveys published in 2017 have indicated a positive year for tourism this year, which could reflect well on players in the global travel retail industry and back up Swatch’s confident outlook.

Wholesale travel brokerage company Tourico Holidays’ ‘2017 Global Hotel Trends Report’ suggested in January that nearly all of the world’s major travel regions were outpacing their prior-year hotel bookings. The total number of hotel room nights booked for 2017 was up +28.7% year-on-year worldwide.

Analyst ForwardKeys reported an improvement in the number of tourists from China visiting Europe ahead of the recent Chinese New Year celebrations, while the UNWTO World Tourism Barometer has projected worldwide travellers to grow at a rate of +3-4% in 2017.

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On the move: ForwardKeys’ projection of where tourists from China were set to celebrate Chinese New Year 2017

UNWTO said Europe is expected to grow +2-3%, a slower pace than Asia Pacific and Africa (+5-6%), the Americas (+4-5%) and the Middle East (+2-5%).

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