Letter to Shareholders July 17, 2025 Download PDF (416.12 KB)

L

ETTER TO SHAREHOLDERS

e

• Net sales of CHF 3 059 million, -7.1% against the previous year at constant exchange rates and on a comparable basis1) (-10.4% at current rates). Negative currency impact of CHF -113 million.

• Operating profit of CHF 68 million (previous year: CHF 204 million). Operating margin of 2.2% (previous year: 5.9%).

• Net income of CHF 17 million (previous year: CHF 147 million). Net margin of 0.6% (previous year: 4.3%).

• Operating cash flow of CHF 180 million (previous year: CHF 90 million). Net liquidity2) of CHF 1 091 million (December 2024: CHF 1 376 million).

• Equity of CHF 11.7 billion (December 2024: CHF 12.2 billion). Equity ratio of 86.2% (December 2024: 87.3%).

• The decline in sales is exclusively attributable to China (including Hong Kong SAR and Macau SAR). Sales in the other regions reached the record years of 2023 and 2024 in local currencies.

• Double-digit sales growth in North America, India, Turkey, Middle East and Australia. Impressive performance of the brands Omega, Longines, Rado, Tissot, Hamilton and Swatch in the USA, with increases of 10% to 30%.

• Operating margin in the Watches & Jewelry segment (without Production) at 10.1%, in the second quarter at 13.5%.

• Strongly negative operating result in the Production segment due to the strategically and deliberately maintaining of production capacities and jobs in Switzerland.

• In China, there are first positive signs of improvement, particularly in e-commerce and the reduction of inventories at retailers. The Group therefore expects an improved market environment in the Greater China region in the second half of the year.

• In summer, Swatch will launch a unique concept for personalizing Swatch watches using AI (Artistic Intelligence).

1. At the end of 2024, the Group transferred the Rivoli Group's eyewear business to a new company in which a minority stake is held. The calculation of the change in sales from the previous year does not include the business transferred.

2. Cash and cash equivalents as well as financial assets, securities and derivative financial instruments, minus current financial debts and derivative financial liabilities.

HALF-YEAR REPORT

-11.2%

- in % of net sales

- in % of net sales

Investments in non-current assets Equity, 30 June

Market capitalization, 30 June

3 445

204

5.9%

147

4.3%

283

12 166

9 617

- Registered shares

- Bearer shares

0.52

2.62

0.01

0.06

Unaudited figures

HALF-YEAR REPORT

In the first half of 2025, the Group's net sales at constant exchange rates were 7.1% below the previous year, on a comparable basis (excluding the eyewear business in the Middle East, transferred at the end of the previous year). The negative currency impact amounted to -3.3%, or CHF -113 million.

Weak consumption in China (including Hong Kong SAR and Macau SAR) and in the Southeast Asian markets, which are heavily dependent on Chinese tourists, continued to have a negative impact on sales and results. Wholesale business in Greater China declined by more than 30%, partly due to the closure of third-party stores, while the Group's own retail business performed slightly better with a 15% decline. This region's share of the Group's total sales has fallen from 33% to 24% in the last 18 months. The Group expects a slight improvement in consumption in China (including Hong Kong SAR and Macau SAR) in the second half of the year.

The USA, Mexico and Canada achieved double-digit growth. In particular, the Omega, Longines, Rado, Tissot and Hamilton brands gained market share, and Swatch also exceeded the very strong figures posted in the previous year. India recorded sales growth of over 20% on the previous year. Japan achieved sales at the level of the record year of 2024. Sales in the Middle East and Australia also developed very well. Switzerland suffered a slight drop in sales due to the very strong Swiss franc, while the other European markets closed at the level of the previous year.

More than 45% of the total sales in the Watches & Jewelry segment was generated by the Group's retail activities. With the exclusion of China, the brands increased retail sales significantly compared to the previous year in local currencies. Sales through e-commerce managed to achieve double-digit growth.

The Group maintained its marketing investments to further boost the appeal of its brands. The Group brands launched promising new products in the first half of 2025, thanks to the Group's industrial and innovative strength. Breguet's special models to mark the brand's 250th anniversary are particularly worth mentioning. Omega had great success with the introduction of Aqua Terra for ladies in June. This collection is equipped with a completely new, ultra-thin mechanical Master Chronometer movement, a technological masterpiece. Tissot launched the PRC 100 Solar with its revolutionary photovoltaic dial. The jewelry segment with Harry Winston continued to develop well.

This summer, Swatch will launch the ultimate in personalization as a world first. Customers will be able to communicate directly with Swatch's artistic intelligence, called AI-DADA, to create their own Swatch watch. AI-DADA will suggest designs inspired exclusively by a database of 40 years of Swatch design history, street painting, events, etc. Each watch will therefore be absolutely unique, according to the customer's wishes, while preserving the Swatch DNA.

HALF-YEAR REPORT

The low level of orders in some cases, both from third parties and from the Group brands, led to a decline in sales and strongly negative operating results in the Production segment. The Group deliberately refrained from laying off its qualified personnel just to mitigate the financial impact. The production companies also did not introduce short-time working.

The Swatch Group's high degree of verticalization leads to losses in Production in the event of a sharp drop in sales. However, once the upswing sets in, the Group benefits more strongly from it. Swatch Group remains committed to its strategic industrial alignment, namely the manufacture of high-volume products in Switzerland, which also benefits the luxury segment. In this domain, the Group is at the forefront of innovation and technology. This is in the interest of the entire Swiss watch industry, including luxury.

Excellent results were reached in the Electronic Systems segment. Renata, Micro Crystal, and EM Microelectronic occupy a worldwide leading position in segments such as healthcare, mobility, battery management system, and miniaturized Bluetooth. In the first half of 2025, segment sales increased by 20.3% (at constant exchange rates).

Inventories fell by CHF 221 million or 2.9% compared to December 2024, primarily in the category of finished watches and jewelry.

The number of employees decreased by 1.9% in the first half of 2025 due to natural fluctuations and amounted to 31 852 persons at the end of June (December 2024: 32 477).

The USA, Japan and India continue to have great growth potential. The Group expects a further reduction of inventories at Chinese retailers and thus a recovery in orders. E-commerce in China continues to show positive signs of increased consumption. As a result, the Group also expects production capacity utilization to improve, driven in particular by numerous new product launches in all price segments.

HALF-YEAR FINANCIAL STATEMENTS

3 059

100.0

3 445

100.0

61

268

-798

-1 316

-177

-25

-1 254

1.8

7.8

-23.2

-38.2

-5.2

-0.7

-36.4

Other operating income

Changes in inventories Material purchases Personnel expense

Depreciation and impairment on property, plant and equipment Amortization and impairment on intangible assets

Other operating expenses

68

43

-549

-1 227

-186

-22

-1 118

Other financial income and expense

Interest expense

Share of result from associates and joint ventures

-8

-1

4

63

204 5.9

22

-1

-1

0.6

-0.0

-0.0

0.3

1

0.0

2.4 225 6.5

224 6.5

Non-operating result

-1.8

-78

-2.2

0.6 147 4.3

Result before income taxes

Income taxes

Net result

Attributable to shareholders of The Swatch Group Ltd

Attributable to non-controlling interests

3

14

136

11