Swatch Gets a Sales Bounce With a Margin Bruise

Swatch Group reported stronger first-half sales as demand improved across its watch brands and shoppers lined up for its Royal Pop pocket watch collaboration with Audemars Piguet. Sales rose 8.5% at constant exchange rates to CHF 3.12 billion (about $3.8 billion), helped by a sharp acceleration in May and June. But operating profit fell to CHF 52 million, badly missing expectations, as currency effects and production costs weighed. The watches are moving again. The margins, less so.

Swatch Group, owner of Omega, Longines, Tissot, Breguet and Swatch, reported first-half net sales of CHF 3.12 billion. At constant exchange rates, sales rose 8.5% from a year earlier. On a reported basis, growth was much weaker because the strong Swiss franc dragged on results.

The company said sales momentum improved sharply in the second quarter, especially in May and June. Demand was helped by strength across price segments and regions, including the US, Europe, Japan, South Korea and China.

A major highlight was the Royal Pop, a pocket watch made with Audemars Piguet. The launch triggered long lines in cities including New York, London, Barcelona and Dubai, with demand so strong that Swatch had to close some stores and limit queues.

But profitability disappointed. Operating profit fell to CHF 52 million from CHF 68 million a year earlier, well below forecasts of around CHF 120 million. Net income was only CHF 16 million, roughly flat from last year.

Swatch blamed negative currency effects and weakness in its production segment, where it has chosen to maintain capacity and jobs despite pressure on profits.

Swatch finally has something the luxury watch industry has been missing lately. Momentum.

After two difficult years, the group is back to sales growth. That matters because Swatch had looked increasingly out of step with stronger rivals such as Richemont and Rolex, which have held up better through the luxury slowdown.

But sales growth without profit growth is only half a recovery. Swatch sold more, generated excitement and pulled customers into stores. Yet operating profit still fell and missed expectations by a wide margin. The market wanted proof that demand was turning into earnings. Instead, it got proof that the top line is healthier than the bottom line.

One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.

Currency is part of the problem. Swatch earns globally but reports in Swiss francs, and a strong franc can crush translated sales and profits. That is not a brand problem, but it is very much a shareholder problem.

The production segment is the other issue. Swatch says it maintained capacity and jobs, which weighed on profit. Strategically, that makes sense. Swiss watchmaking depends on skilled labor, manufacturing depth and long-term know-how. Cutting too hard during a downturn can damage the machine you need when demand recovers.

The Royal Pop shows both the promise and the limits of the strategy. Swatch still knows how to create a frenzy. The MoonSwatch formula proved that playful collaborations can turn Swiss watchmaking into pop culture. Royal Pop does something similar, blending accessibility, scarcity and a halo from a top-tier luxury partner.

But one viral product cannot fix the whole group. Swatch needs momentum across Omega, Longines, Tissot, Hamilton, Breguet and its mid-range brands. The good news is that the company says several of those names are growing again.

The watch industry is still navigating a tricky consumer backdrop. China remains uneven. Middle East tensions are disrupting luxury spending and tourism. Younger consumers are selective. And after years of price increases, some shoppers are pushing back on value.

Swatch has an advantage because it spans price tiers. It can sell a playful collector piece, a Tissot to a first-time buyer, a Longines to an aspirational customer and an Omega to someone still emotionally attached to the moon landing.

But the company now has to prove that growth can scale profitably.