Swatch Group H1 profit squeeze: China slump offsets US and MEA gains
Bottom Line Impact
Absent rapid channel and inventory actions, margin remains near 2 to 3 percent; executing a DTC shift in China and reallocating inventory to US and GCC can drive a 100 to 200 bps margin recovery and defend share in core mid to upper-mid watch segments.
Key Facts
5- H1 2025 sales CHF 3,059m, down 7.1 percent at constant FX and 10.4 percent on a comparable basis
- Operating profit CHF 68m vs CHF 202m in H1 2024, implying c. 2.2 percent operating margin
- Greater China wholesale declined by more than 30 percent; group-owned retail in the region fell 15 percent
- Non-China regions delivered double-digit sales growth, notably USA, India, Turkey, Middle East, Australia
- Management guides for slight consumption improvement in China in H2 2025
Time Horizons
Executive Summary
Swatch Group reported H1 2025 sales of CHF 3,059m, down 7.1 percent at constant FX, with operating profit collapsing to CHF 68m as Greater China wholesale fell over 30 percent. Strength in the USA, India, Middle East, Turkey, and Australia provides reallocation headroom, but a rapid channel reset in China and tighter inventory control are critical to stabilize margins in H2.
Actionable Insights
Immediate Actions (Next 30-90 days)
Accelerate China channel reset by closing or converting 50 to 70 low-productivity wholesale doors and expand DTC via mono-brand boutiques and WeChat mini-programs to raise China DTC mix by 5 to 7 pts by Q4.
Rationale: Wholesale down over 30 percent vs 15 percent in owned retail indicates faster DTC pivot will stabilize sell-out and pricing power.
Role affected:CEO
Urgency level:immediate
Rebalance 8 to 12 percent of H2 inventory from Greater China wholesale to US, GCC, and India; target China wholesale weeks of supply reduction from 18 to 14 and free CHF 150m to 200m working capital.
Rationale: Double-digit growth in these corridors can absorb stock at full price, lifting gross margin 100 to 150 bps vs discounting in China.
Role affected:CFO
Urgency level:immediate
Flex production 10 to 15 percent on slower-moving China-first SKUs, prioritize allocation to US and GCC bestsellers, and institute a rolling 8-week SIOP cadence across ETA, case, and assembly plants.
Rationale: Aligning supply to demand hotspots reduces obsolescence risk and protects contribution margin through H2.
Role affected:COO
Urgency level:immediate
Short-term Actions (6-12 months)
Launch two region-specific capsule drops with limited allocations for Golden Week and Singles Day, supported by KOL livecommerce and CRM retargeting; cap run sizes at 5k to 10k units per brand tier to preserve scarcity.
Rationale: Slight H2 China improvement plus scarcity-led drops can convert traffic without broad discounting and support ASP resilience.
Role affected:CMO
Urgency level:short-term
Risks & Opportunities
Primary Risks
- Prolonged China demand softness triggers further wholesale destocking and gray market leakage
- FX volatility and strong CHF compress export margins despite local currency stability
- Discount contagion in China erodes brand equity and ASPs across mid-tier brands
Primary Opportunities
- US, GCC, India outperformance enables premium mix and full-price sell-through
- DTC expansion in China improves data capture, pricing control, and CRM-driven repeat
- Targeted limited editions and travel retail activations lift conversion without broad promotions