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Investing.com - Shares of Swatch Group (SIX:UHR) were higher in early trading in Switzerland on Thursday, as analysts suggested that the watchmaker’s performance could improve in the second half after sales declined in the opening six months of its financial year.
The firm behind brands like Omega and Tissot, as well as its eponymous timepieces, reported a 7.1% drop in sales at constant exchange rates versus a year ago to 3.06 billion Swiss francs ($3.82 billion). Analysts had called for sales of 3.2 billion francs, according to LSEG data cited by Reuters.
Swatch said the fall was linked in large part to weakness at its operations in China, which offset strength in other regions, including North America.
Operating profit in the first half also decreased by almost 67% to 68 million Swiss francs.
"These results confirm our view that the global watch market remains under pressure at present with outsized challenges in the Greater China region," analysts at RBC Capital Markets said in a note.
Swatch’s China operations have faced pressure as the country’s economy grapples with tepid consumer demand and a protracted property crisis. However, Swatch said it expects the market environment in its Greater China region to improve in the second half of 2025.
"[T]here is a hopeful note to the second-half outlook in China which talks to a better balanced inventory position at retailers underpins Swatch’s hopes of a recovery in orders later this year," analysts at Jefferies said in a note to clients.
Swatch’s business in the United States, Japan and India also continues to have "great growth potential," the strategists said.
Crucially, because Swatch does not report first- or third-quarter returns, it was the first earnings report since U.S. President Donald Trump unveiled his sweeping "reciprocal" tariffs on a host of countries in April.
The levies have contributed to a sharp jump in the Swiss franc, which has dented the appeal of the firm’s watches to foreign buyers. A negative currency impact of 113 million Swiss francs weighed on Swatch’s latest earnings, the company flagged.