Swatch Group Eyes 2026 Rebound After Challenging Year, Points to Strong Second-Half Momentum

The Swatch Group, the Swiss conglomerate behind brands like Omega, Longines, and Harry Winston, navigated a challenging 2025 marked by currency fluctuations and strategic spending, setting the stage for what it anticipates will be a significant recovery in 2026. While full-year profits contracted, management highlighted accelerating sales momentum through the latter half of the year as a key indicator of underlying brand strength.

For the 2025 fiscal year, the group reported net sales of SFr6.28 billion ($8.11 billion), a decrease of 1.3% at constant exchange rates. Net profit saw a more pronounced decline, falling to SFr25 million from SFr219 million the previous year. The company noted that adverse currency movements shaved SFr308 million from revenue, representing a 4.6% headwind at current rates.

However, a closer look reveals a tale of two halves. Trading strengthened considerably as the year progressed, with second-half sales rising 4.7% at constant currencies. This momentum quickened to a 7.2% increase in the fourth quarter, a surge that was broad-based across all price tiers and geographies. Operating profit for the year declined to SFr135 million (margin: 2.1%), down from SFr304 million in 2024.

"The numbers tell a story of resilience," said Michael Thorne, a luxury goods analyst based in Zurich. "The significant profit drop is concerning, but the double-digit sales growth in Q4, especially in the Americas and other key markets, suggests consumer demand for Swiss watches remains robust. The 2026 forecast hinges on successfully converting this sales momentum into healthier margins."

Geographic performance was mixed but showed clear bright spots. Excluding Greater China, revenue increased 3.4% for the year and over 10% in the fourth quarter. The Americas region, led by the U.S., delivered nearly 20% growth in local currency terms. Markets in India, the Middle East, and parts of Europe also recorded double-digit advances, with recoveries noted in the UK, Germany, South Korea, and Taiwan.

The group's production unit posted a heavy loss, attributed to the decision to retain full capacity and workforce without compensation for reduced working hours—a move characterized as a strategic investment in skilled labor preservation. Conversely, cash generation improved markedly, with operating cash flow surging 52.3% to SFr507 million.

Other notable highlights included a record-breaking December for the high-jewelry Harry Winston division and online sales surpassing pandemic-era peaks in many regions. The board proposed maintaining its dividend at SFr0.90 per registered share and SFr4.50 per bearer share.

Looking ahead, Swatch Group's management expressed confidence in a 2026 rebound, forecasting "substantial growth" across all price segments. They anticipate that higher production utilization will "massively reduce, or even help reverse" the losses in the manufacturing division and lift overall group profitability.

Eleanor Vance, a retail strategist, offered a cautious view: "The forecast is optimistic but plausible. Their direct-to-consumer retail expansion, now accounting for over 47% of revenue, gives them better control and margin potential. The real test will be sustaining the Q4 growth rate while managing costs more effectively."

Not all observers were convinced. David Chen, a portfolio manager focused on consumer discretionary stocks, reacted sharply: "This is a classic case of 'kitchen-sinking' a bad year to set up an easy beat next year. A SFr25 million net profit on over SFr6 billion in sales is abysmal. Talking up a 'rebound' feels like a distraction from fundamental margin issues and over-reliance on a single strong quarter. Investors should demand a clearer path to sustained profitability, not just top-line growth."

This analysis is based on financial results originally reported by the Swatch Group.

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