Swatch Group Plans to Cut 2,400 Jobs and 260 Stores Worldwide
The Swatch Group plans to cut six percent of its workforce, or about 2,400 jobs and close 260 stores as part of its downsizing and cost-cutting measures brought about by the negative effects of the global COVID-19 pandemic, according to a report in the National Jeweler. The Swatch Group doesn’t just make Swatch watches; it represents some of the biggest Swiss watchmaking brands with a combined market capitalization of over $10 billion and its sales from the design, manufacture and sales of its finished watch and jewelry products, watch components and electronic parts from all its companies exceed $8 billion.
However, the first half of this year saw a 43 percent drop in the company's net sales year-on-year to about $2.34billion. The report said the strong Swiss franc made it disadvantageous to Swatch, whose business relies mostly on exporting premium and luxury brand timepieces and jewelry, as finished products or as components. The Swiss franc's appreciation against the US dollar cost the Swatch Group a whopping $120 million, according to Chief Financial Officer Thierry Kenel.
Swatch Group CEO Nick Hayek
The group enjoyed a big kick-off in January but due to the pandemic lockdown, over 80 percent of its distribution channels were closed in the months after. The group took the biggest hit in the China market, while the US market was not as badly hit, thanks to its emerging online business strategy. It reported an operating loss of $348million which surprised even the analysts who did not expect it to be that bad.
“The reason being was the online business, which we have built up over the past year,” Chief Controlling Officer Peter Steiger said.
“There are nearly no sales in Hong Kong at the moment,” CEO Nick Hayek said who said suffered from political unrest aside from the negative impact of the coronavirus.
Most of the job cuts were at the retail store fronts rather than its production facilities. However, only about 50 percent of its manpower in Switzerland are back to work full time. The Swatch Group has a total workforce of about 36,000. According to Steiger, partial unemployment is expected to end this third quarter and the group gears up to full capacity towards the end of the year.
Aside from labor cost-cutting and store downsizing, it will reduce its marketing investments to include reducing sponsorships in big events where its brands have major presence. “For the full year, we are very confident that we will show a very good profit, [but] of course not comparable with the year before,” said Hayek.
The watchmaker group owns Omega, Tissot and Longines watch brands and plans to roll out new models including the new Omega James Bond edition and a Tissot Connect smartwatch.