PARIS — The cost of maintaining production capacities and jobs without asking for subsidies for reduced hours is clear at the Swatch Group, which published 2025 figures on Friday.
The Swiss company’s net income for the year plunged 88.6 percent to 25 million, or $32.5 million at current exchange rates.
Revenue for the full year came in at 6.28 billion Swiss francs, or $8.17 billion, down 5.9 percent against 2024’s figures at current exchange rates, exceeding the consensus of 6.15 billion Swiss francs, or $8 billion.
Foreign exchange variations had a 308 million Swiss francs impact, while Swatch’s operating profit totaled 135 million Swiss francs, less than half of what it was in 2024.
Markets took to the results well, with Swatch shares jumping 7 percent to 172.5 Swiss francs, or $224.7 at current exchange rates, in early morning trading.
“Sales beat, margin miss but confident on outlook” is how Barclays analyst Carole Madjo summed up the Swiss watchmaking group’s annual tallies.
Swatch Group pointed out that the operating profit of the watch and jewelry segment was 549 million Swiss francs, or $715 million, but that its operating margin fell to 9.5 percent due to increased marketing investments to support new launches in the second half of 2025.
It attributed the “strongly negative operating result” in its production division to significantly lower sales in its production segment “due to a reduction of the orders both from third parties and the group’s own brands.
“The group maintained its deliberate policy of not making redundancies and did not request for any compensation for reduced working hours, which would have represented a significant amount for the year,” the company said. “Maintaining production capacity is very important to respond to the positive dynamic seen in the second half of 2025, which will continue this year, so the production result will improve substantially.”
Meanwhile, sales at the group’s brands, which includes watchmakers Omega, Blancpain, Tissot, Bréguet and Swatch as well as jeweler Harry Winston, continued to be impacted by Greater China.
Elsewhere, sales were on an accelerating upwards trajectory, according to the Swiss company, with an overall 3.4 percent increase for the full year, that accelerated to 8.2 percent in the second half of the year and was 10.4 percent in the final quarter.
It was “a record year” with a 20 percent leap in sales across the Americas, which includes the U.S., a result that confirmed “sustainable and solid growth throughout the year, regardless of the tariffs’ chaos,” Swatch Group said.
There was also “substantial progress” in promising markets such as India, the Middle East, Mexico, and Poland, with “double-digit sales growth in all price segments.”
Other markets including the U.K., Germany, South Korea and Taiwan saw sales increase in the second semester.
Swatch Group also touted online sales, calling its development “spectacular” and “surpassing the record levels reached during the Covid years in many regions and for all brands in this distribution channel.”
Looking ahead at 2026, the Swiss group “expects substantial growth for the year 2026 in all price segments” given the momentum of 2025’s second semester, which it said continued in January. It expects this to improve the capacity utilisation in its production arm and “massively reduce, or even help reverse” its negative result.
Despite the group’s positive outlook for 2026 and its view that maintaining production is a forward-looking decision, analysts took a more cautious view.
The group is “likely to continue facing structural headwinds across its entry and mid-price portfolio, given ongoing increases in smartwatch penetration rates,” according to RBC’s Piral Dadhania.
“For its luxury brand portfolio, we believe Omega is relatively underperforming peers including Rolex and Cartier, with marketplace inventories also likely elevated,” he wrote in a research note. “Swatch Group has the highest direct exposure to the Chinese consumer across our coverage, which we expect to remain under some pressure in [the first half of the year], particularly for the Swiss watch category, before potentially stabilizing in [the second half].”
Its decision to maintain capacity also raised eyebrows, given an overall downturn in the entry and mid-priced segments highlighted in Swiss export numbers in recent years.
In its annual report published separately on Thursday, the Federation of the Swiss Watch Industry’s president Yves Bugmann highlighted that “production in Switzerland remains under pressure, especially upstream in the value chain, in a complex environment in which consumer trust remains weak as a result of the global geopolitical situation.”
“We wonder if this company is likely to remain a quintessential value trap until management recognizes the reality of a structurally smaller market for watches – especially in the entry segment – and adjusts capacity accordingly,” Bernstein analyst Luca Solca said in a research note.
