Why Swatch is facing tough times
Swatch's response? Tap into the '80s zeitgeist with colourful, low-priced designs—funky, artistic, eclectic and made for collectors along with a whole new demographic that saw them as fashion, not function.
Swatch used its skyrocketing revenue to support its more staid, traditional brands while acquiring new ones. But fast forward to today, and the market's changed: phones and smartwatches have undercut low-cost watches, leaving luxury as the main engine for growth. And a new set of problems, from low sales in China to Donald Trump 's tariffs, have made matters even worse.
The luxury spending slowdown in China has hurt all brands, but Swatch got hit more than most, given that 27% of its 2024 sales were attributable to the Asian nation. While the company said last month that sales data now show a possible turnaround, any recovery in China is expected to be slow. Meanwhile, Trump's radical imposition of a 39% tariff on imports from Switzerland puts high-end watch brands in a corner, since they can't raise prices much more in the current environment.
Simultaneously, investors have been calling out Swatch, urging it to capitalise on the still-lucrative high-end segment. Steven Wood, founder and chief investment officer of New York-based GreenWood Investors, even mounted a campaign to win a seat on Swatch's board. He was defeated, but his intervention may underline the frustration among investors worried about the company's future. The Hayek family, which controls more than 40% of Swatch voting rights, has pushed back by saying it shouldn't just be making watches for the wealthy.
To be sure, Swatch managed some mainstream success as recently as 2022, with the MoonSwatch. The quartz-driven timepiece leaned on the heritage and look of the Omega Speedmaster Moonwatch, an iconic watch worn on Apollo moon missions. Swatch sold more than a million of them that year, but it's struggled to generate the same sort of buzz across the rest of the group.
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