Swatch Shares Slump on Profit Warning

ZURICH—Swatch Group AG warned Friday that sales and profit slid during the first half of 2016, sending its shares sharply lower and suggesting that the luxury goods sector faces major headwinds in an uncertain global economic environment.

The Biel-based company, which is known not only for its cheap plastic Swatch watches but also its more expensive brands, including Omega, Blancpain and Breguet, said its net sales are expected to have declined 12% in the first half of 2016 compared with the same period in 2015, due to weaker sales in key markets such as Hong Kong and Europe. It also said that profit likely fell by 50-60%.

The decline was "obviously due to the decrease in sales but also to the tradition and the industrial long-term philosophy of the Swatch Group to consider its employees not just as a cost factor but to keep them…to maintain investments in new products and marketing and to pursue a defensive price increase policy," Swatch said in a statement.

Swatch said it would release details of its first-half results on July 21.

Swatch shares plunged nearly 13% in early European trading Friday.

"The weak set of figures were widely expected, however, more severe in magnitude," said analysts at Baader Helvea Equity Research, in a research note.

"Only the full-set of figures will give the picture to what extent the figures include one-offs," they added.

The company gets around 45% of its sales from high-end brands like Omega, which retail for more than $7,000, and 20% from its upper-end brands like Longines and Rado, which sell from around $1,200.

Write to Brian Blackstone at brian.blackstone@wsj.com

(END) Dow Jones Newswires

July 15, 2016 04:25 ET (08:25 GMT)

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