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GENEVA: Swatch Group fell the most in more than two years after Switzerland’s largest watchmaker reported market turbulence in China that contributed to a slowdown in the fourth quarter.
The stock fell as much as 8.2%, the steepest decline since July 2016. Expensive timepieces are the one segment of the luxury-goods market that’s sputtering as high-end Chinese consumers turn their attention to Louis Vuitton bags and Gucci fashion.
Until lately, the Chinese have been buying up about half of the timepieces Switzerland produces. As the market leader in China, the maker of Omega and Blancpain watches is at greatest risk of a downturn, which also threatens to weigh on Richemont. Meanwhile, Swatch’s cheaper brands face increased competition from the Apple Watch, and the company is finding it needs to expand more in e-commerce to lure more millennial shoppers.
“The problem is in the low-end watches and its exposure in the greater China region,” wrote Jon Cox, an analyst at Kepler Cheuvreux in Zurich.
Swatch reported 2018 operating profit that was 10% lower than analysts’ estimates as demand weakened in the final three months of the year and production bottlenecks cut into sales of Omega and Longines timepieces.
Unfinished watches from those two brands added to an inventory figure that reached 6.9 billion francs (US$7 billion). Swatch pledged to resolve the production problems in the first half, and the company forecast healthy growth in 2019.
Analysts have forecast an 18% increase in operating profit for the full year.
Tissot this year will launch its long-awaited T-Touch smartwatch, a product that runs on a proprietary operating system and has faced several delays.