Transcript of the conference call on US Tariffs, August 27, 2025Download PDF (192.67 KB)

2025-08-27 at 14:00 CEST

COMPANY REPRESENTATIVES

- Nick Hayek, Member of the Board and CEO of The Swatch Group

Hello, everybody. I hope you all had good holidays, and you started well in the second half of the year. So, first of all, let me give the information why we have called for this special information to investors and analysts. It's a positive reason. First of all, we had speculation that this will be a negative call. No, it's something that we felt, and I felt personally just walking around in the streets, in the cities, in Switzerland and outside of Switzerland, I had so many people from the street that were asking me, oh, what is happening? Do you understand taxes, or will it be the end of Switzerland? The industry is doomsday, what are you going to do? Are you going to put the production somewhere in another country, to Greenland because probably it will be overtaken by Switzerland?

So there was so much speculation, wrong information. And when I was looking at the people who should talk, and to be clear, the Swiss government, for example, I have the impression they disappeared in agony. We don't know what they do. So I discussed with Mr Kenel, who is sitting here with me, Chief Financial Officer, with Mr Lopez, Controlling, and with Mr Tschumi last week. and I say, hey, guys, we have more information, we know about the watch industry. We know the United States, we know exactly what impact it will have, we know exactly what we are planning to do. We should share the information with our investors and with our analysts.

So this is a positive move, and we want to talk with you about certain aspects where the US market is, because since our last call for the half year results, we have now one month and a half more that we have an insight into the market, and we really are keen to respond to questions about this issue of the tariffs to help you to navigate through this situation.

And as always, we see more opportunities in this situation than we see negativities. We don't know what will happen, perhaps next week Mr Trump will decide something else, more taxes or less taxes, but the discussion today is about the facts, and what we are thinking will happen in the future.

So that's the reason of this call. If you want, it's a step, quite creative and different, that Swatch Group has never done, to call you, to invite you to talk with us, and we share the information. I agree, it's an extraordinary situation to have a United States, or a country, whatever country in the world, just deciding arbitrarily, putting taxes up. So that's the reason of it, and not any doomsday announcement.

So let me quickly give you an orientation, where the American market is for Swatch Group, and probably also for many other in the Swiss Watch Industry. Might be interesting, before we come to the question and answers. When I look to our numbers in local currency, we have said, and the people who were listening to the half year results, we have said we have a very dynamic situation in the United States.

So we are giving you the numbers of wholesale, of retail, and we saw that there is double-digit growth. Just as a reminder, when I come from January, February, March, April, we were about plus 23%, plus 34%, even in the month, plus 28%, plus 44%. That was April, when we did the first price increase because of the 10% taxes. I remind you, we changed, in some brands, the prices about 5% to 8%, or 5% on average.

And then, of course, there was a selling in April, and there were also consumers buying in the retail, and here we had a peak of plus 55.8%. And in the wholesale, also, plus 50%. And in the retail, plus 44%. It's clear the wholesale was performing stronger, because the retailers wanted to have, before the taxes and the price increase, products.

Then, in May, we had growth that was around 15%. Of course, because the month before was very strong, but still retail outgrew the wholesale. So the consumer continued. In June, we increased again to nearly 20%. And, again, the retail's stronger than the wholesale. And when we go to July, that's a number you don't know, we increased to plus 19%, going towards 20%, and always the same trend. The retail, means the consumer who buys, much stronger than the wholesale, which is healthy. We don't want to fill up the stock. And then, the forecast for August is, again, above 20%. And when you take the retail alone, it's plus 23%. That's the forecast for the month of August.

So the business is continuing strong for brands like Omega or Longines, very strong a Tissot, so, for example. They are, in the forecast for August, plus 40%. They are strong for the lower market segment, equally, like Swatch. And also for Blancpain Villeret [?], but on a lower level, because that business in the United States, we talked about it, that our distribution is not there, where it should be.

So the situation of the US is continuing to be strong. At the same time, Canada and Mexico are also continuing over the months in a very strong way. So Canada also continues, when I take July, or Mexico first, we have a plus 26%, and own retail plus 29%, and wholesale plus 24%. And the forecast of August is, in own retail, plus 32%, and in wholesale it's plus 6%. So the strong performance continue.

When you have Canada, we have had, in July, over 25% plus. Also, again, the retail much stronger in the growth and the wholesale, but both double-digit in the growth. And the forecast for August is, again, close to 20%, always in local currency. So you see that the whole continent is continuing to perform well. When I take the e-commerce in the United States, in July, the own e-commerce, which not all brands from Swatch Group buy in, is nearly plus 40%. And August is also showing a very interesting situation.

So this is the situation as it is today, with the 5% price increase that we did in April. So you see, it had no impact. Not in the lower market segment, even to the contrary, nor in the upper market segment. So this means that the people are really looking for brands, for products, and they are searching and ready to pay more for these products. And that's the situation we have.

Now, what's happening, you saw this in the export numbers, we already started well in advance, in April, to put more stock into our affiliates. We have affiliates in the US, in Mexico, and we started, of course, to have more stock over there, over a strong period of time. And that's the advantage that we have stock. Some of you are always claiming we have too much stock, and here is just the proof it's very good to have stock for this kinds of situation.

However, of course, if you have newness and launches that we have for certain brands, you will have to deliver these products. Either you deliver it to the US, or you don't deliver it to the US. But when you deliver it, of course, we have to apply a price increase, and it cannot only be on the new products. It will, then, be alignment with the total collection that is there.

So when it comes now to this 39%, the famous 39%, it's, of course, not an increase in 39% for the consumer. And most of you know that in the chain from Switzerland going to the US, to our affiliate, you have a transfer price, and on the transfer price arriving in the US, this tax will be

applied. Then, you have the margin of our affiliate. Then, you have the margin of the retailer. If it's our own retail, of course, it's the margin that remains in the United States.

And on these different parameters, we can play, together with margins that we can adapt in certain distribution and certain brands, you can have a reduction in margin, in percentage or in value, and you have the price increase on the other side to maintain and protect your margin. So if you calculate all this, we will be around a price increase around between 5% and 10%. The mix, as we have foreseen for our brands, is coming up with a price increase in this area.

But it was the experience with did [?], beginning of the year, and looking at the high demand, we don't think that there is a big impact in whatever segment you are with these kind of price increases. So not doomsday. On the contrary. At the same time, we think there is not a big impact in the United States. Of course, we would prefer not to have these taxes, because we think about the American consumer, we don't want to penalise him. Why should we? But it's not us, we are forced to go in this direction.

At the same time, you will see we will add additional growth coming from other countries around the US. And in this area, I would like to point to our cruise ship business. We have Mr Lopez, how many points of sales on cruise ships that are US, that are American, that are Caribbean?

We are present in 174 ships in the Caribbean.

So we are president over 170 ships. Mainly, it's the brands like Tissot, like Hamilton, Longines, and there are only very small, very high-end luxury ships, where you have an Omega, a Cartier. And this is a smaller part, but the rest is, of course, booming. It's going well. And, as you know, it's tax free. So most of the people who buy are in these ships.

So this is the situation. So we rather have a scenario that this will dynamize the sales. But, again, don't misunderstand me. If Mr Trump comes tomorrow and says, okay, we are going to decrease the taxes to a lower amount, we'll take it. It's good. We take it in consideration. But if not, we are rather on a scenario that this represents an opportunity. And I'm sorry to say, I'm not happy for the American consumer, but the wish to consume and to buy the brands that we have, thanks also to our good work that we have done in the US on the marketing level and the quality products we have, is rather positive.

And we wanted to share this information with you. Additionally, perhaps I would like also to share information. Some of our brands have competitors in Japan. Now, what we heard is that Seiko, for example, is increasing the consumer price from 15th September in the US by 10%. And what we know also is that Citizen and Bulova increased their prices already enjoyed by 7% to 10%. So you see that even a country that had only taxes, if I remember well, of 15%, of course many of these products are done in China also, so they have higher taxes, also, on the competitive level, when you have brands in the lower market segment, we will not be with our price structure and price increase less competitive than the others. We are already much more competitive with the quality of our product, with our Swiss-Made.

And so this is a picture that I wanted to give you, and I'm happy to give you some info back. But you see, for the watch industry, for the Swiss Watch Industry, this scenario is not nice, makes us more bureaucracy and we have to communicate clearly to the consumer what we did, we did it with Swatch when we launched the Moonshine Gold in the US, where we had to increase by 12%, and we said, we are sorry, this is Mr Trump, it's not us that have decided that you have to pay more.

But we sold everything. I think we could only satisfy 10% of the demand that was there for this product, despite that we had a price tag that went to $450 from $400.

So this is the message we wanted to give you. So no reason to make wrong speculations, have nightmares, sleepless nights. Yes, we had sleepless nights to calculate everything, and for many other reasons, but this situation with the United States doesn't create sleepless nights. However, it would give us all, in our hands, to be strong as a company, to say, yes, we will not die because of this. But we should fight. It's a strong country, Switzerland, a strong industry, to get these taxes down.

So don't misunderstand me, we are supporting a position of a Swiss government that is much stronger than what they have shown at the moment, where they are just hiding and excusing themselves that they cannot act. I had, yesterday, a visit from a Chinese entrepreneur from Beijing. It's not in watches. He has heard about the strong knowhow of our group on chips, on batteries, and how we know to market and to make consumer products. Has nothing to do with watches and has nothing to do with that we have to announce a collaboration. He was just in Switzerland with his people and wanted to visit the Omega Museum, and then we had a lunch together.

And then, he asked me, and that is the preoccupying thing that I have for the Swiss government, he said, my God, we heard your president of Switzerland, she says, oh, we are so small, we are so weak, we can do nothing, we are a victim, we can do nothing. And he looked at me and said, but we in China thought that Switzerland is an independent country, has a strong economy, you have a strong Swiss franc, you are innovative, you are a big investor. We don't understand. Now, we see that are you apparently a very weak country. And then, I told him, of course, he has a wrong impression. That's not the case.

Okay. So, now, I really wanted to give you our point of view, because, as I said, I had many people in the street, people who have shares in Swatch Group, people who are just sales people in a shop where you buy food, because they recognise me, they wear our watchers and they say, oh, my God, what is happening? People where you buy alcohol, not American whisky this time but I stay [?] with vodka, and you see, I felt there is a need that we come out and we say something about the situation. So that's the reason why we made this call.

And now, please, we go to the first question. It's Thomas Chauvet. Please, Thomas, your turn.

Good afternoon, Mr Hayek and Mr Kenel. Thanks for hosting this call. I have two questions. The first one coming back to your pricing strategy, to make sure I understand. So, you did 5% to 8% pricing earlier this year, and you're saying that in order to absorb fully the 39% tariff, another 5% to 10% price increase is needed. Is that just for the US, or are you considering also price increases in other markets? We've seen some of your fashion peers doing more kind of global price increases in the last few months.

And my second question, as you're well into the third quarter, you've provided useful figures for the US in the past couple of months, thank you, could you indicate what local currency growth in July, August you had at group level, if possible, and also in the two other major markets of greater China and the big block of Europe? Thank you.

Okay, Thomas, Thank you. First of all, this call is about the situation about taxes. It's not about forecasting. We have no quarterly reporting. This is nothing that we will go into to say where we are, overall. I can give you some indications for a market like China. Yes, what I said, and you saw it in the export numbers, China is improving, but not in an explosive level. But what I said has been confirmed by the export numbers. And Hong Kong is doing better, and China is also doing better, always on a low level, you compare with last year. But the trend that we said and what we informed

to you in July, when we made the call, remains rather on the positive side for China. Mr Lopez, you want to say something?

And the retail in China in July was good, very good, especially the e-com.

Okay, so what we said, e-com, very good, and retail in general is improving. And we see also that the retailer is destocking, the third party retailer. But it will take some time, because it's still not Paradise. Now, when it comes to the pricing, we have an index that we take from Switzerland without VAT, and we are always adjusting the prices so that we don't face too much parallel market risks, etc. And in this area, we constantly have to adapt prices in Turkey, in India, because the currency, the Swiss franc, is the driver, and the currency changes. So price increases in Swatch Group worldwide is only an adaptation and a reflection of the price, the Swiss francs, in relation to the local currency.

We did something in Japan later on in the year, small adjustments. But here, we talk purely United States. So this price increase, that is between 5% and 10%. Mr Chauvet, so some will go to 8% or 9% of the brands, and this puts the United States not at the problem on the index with all the countries. So you will not have the American price extremely different than in other countries, so that the parallel market is not something that is a danger. So these we have been thinking on. So that's the way we operate.

And, again, it's between 5% and 10%, the price increase, depending on the brands. It's the mixture that I told you between the different levels where we can compensate and not have too strong price increases, but maintaining the margin totally correctly the way it was before.

Thank you very much.

Thank you, Thomas. Melanie Grippo? Melania, excuse me, it's Melania Grippo. Are you here?

Ms Grippo, your line is open. We cannot hear you, maybe your line is on mute.

Melania?

Can we proceed and take the next questioner?

We'll take Jon Cox.

Good afternoon. Thanks very much for this call. Really, really appreciate it. Just to come back to this, 5% to 10%, and you were talking about how the existing stock in the country, you would put the prices up for that, is that what gives you confidence on your ability to maintain profitability? Or actually, are you absorbing some of that pain from the 39%, you've decided to actually absorb some of it yourself because of the situation? That's the first question.

A second one, actually, I'm just going to be a bit cheeky. In terms of China, we saw the sort of public backlash about that Swatch brand advert, and I'm just wondering if you've seeing any negative sort of repercussions on the brand as a result of that. Thank you.

So, first of all, no, we don't absorb nothing. There is no reason to absorb anything. If a country decides to raise taxes, and we will accordingly adapt our prices. We have strong brands, and we are sorry for the consumer in the United States, but we also have to protect our people in the United States, and we are also to support the retailers in the United States.

And we have to show the reality of the situation, that it cannot be that a country that is doing exactly the industrial policy that Donald Trump wants in the United States, to invest more in your industrial base, that we should be penalised, that we just do this in Switzerland. And the consumer is thinking, in the United States, Switzerland is a low-salary country like China or like India or whatever country. No, we are one of the most expensive countries, and we have achieved, when I come to Swatch Group, to maintain the industrial base to work here. And this is an example.

Now, if somebody puts exaggerated taxes on us, then it's the consumer who has to pay a price. But we have it done in transfer price, margins, and price increase, that way that we are not absorbing anything from this impact. The only thing is if the consumer would buy less. But we have really seen that it will not be the case. Some of the consumers will get a better deal somewhere else because they are aware of the taxes. And for us, this is not a problem of the brands, because everybody, and we have clearly communicated, and it will be communicated, and we did it with Swatch when we sold the Moonshine Gold successfully, the price increases you will face is because of the exaggerated taxes that are coming as a burden onto the watches. Nothing else.

It's much easier to explain to a consumer than if it is the Swiss franc who is strong. Because when we say the Swiss franc is strong and we increase prices by 10% in the US, the people don't understand, most of the people, what does it mean, the Swiss franc? But here, I got a lot of remarks and letters, and I said, look, we understand, we are not happy, but we understand that at the end, we have to pay a part of this. Yes, and no, we are not absorbing. We don't see a reason to do that.

The second thing for Swatch, you see the brand Swatch, it's not a campaign, it was two pictures for a basic product from Swatch. And they did a mistake. And we got, of course, feedback from China, and they were not happy about the brand Swatch. It was just about the brand Swatch.

There was nothing that was talking about the other brands of the group. Now, they complain it's racist. Swatch, the president of Swatch, clearly said, look, we apologise, we hurt your feelings, but Swatch is known not to be racist. Nobody can say this. You can be hurt by it, and you can say, it's stupid, it was a stupid picture. I agree. When I saw it, I said, that's stupid.

Now, Swatch, and the president of Swatch, was, last week, in Shanghai in our Swatch Art Peace Hotel. You must know that this is, in 15 years, an investment we do in China. We had 600 artists, one-third of them Chinese, where we are producing art with them. We support them. We let them live three months in our hotel. They have to pay nothing. It's Chinese and people from all over the world, from the US, from Europe. And this is the message of creativity and of art that is inherent to Swatch.

And we gave interviews last week to journalists. And he said, yes, that is a part of the creativity of Swatch. This was a creativity that was, unfortunately, wrong. And I saw him, he came back two days ago from China. There's no impact. There is no impact. When you look at sales numbers, the visitor numbers, it has calmed [?] down. We have no impact on our stores. The traffic has remained the same. I would even say some traffic has increased because they were curious to see what is happening. But again, it was stupid, it was a mistake, but Swatch is clearly not racist.

And there was also something that is different in this reaction in Asia, but especially in China. You have state media. In the other cases of other brands that did big campaigns, the government media were calling for a boycott of the product. This has not happened with Swatch. The state media support us, understand us, accept the apology that Swatch did, accept the apologies that the president of Swatch, Alain Villard, did onsite in Shanghai when he was there. And in a normal

way, not in a way that you disappear, but in showing what Swatch is and what it means also for the Chinese consumer. So, sorry what has happened from Swatch, but no impact on the sales level.

Thanks, that's very clear. I wonder if I could just ask, I think you've said publicly you have six months a stock in the US, I wonder if you can just confirm that? And I wonder if you would have to put up prices again once that stock has run out, if we maintain this 39% tariff.

Yes, Jon, you have to know when the tariffs were announced, we shipped our stock from Switzerland over to the United States. And that was done in April. The second time that we have done that was as we heard the second increase in tariffs on 1st of August, and 1st of August, this is the national day so nobody was working, but we worked all together and, with the logistics and the aircrafts we worked in order to ship all the goods we can until August 7th. So that means that we have increased our stock in the United States from six months to ten months of sales.

So this is the situation right now, but it's not the situation for Harry Winston, because you know Harry Winston is a US brand, jewellery brand, and they have their stock already in the US.

But Harry Winston, perhaps to say that they face a tax of 30% in China, because it's an American product that you have in China.

And maybe I can add, we just prepared, thanks to the stock that we have in Switzerland, more or less one week we shipped more or less that we shipped in one month. So that's why the stock is now increased.

And we can go a step-by-step increase, Jon. We can decide that we do a step-by-step increase. If the 39% remains, we will make the increase quite quickly, independent of when the stock is running out, and not because we have to add new products. And when you add new products, you cannot come with a product that is 10% or 8% more expensive and in comparison with the rest of the collection, you are lower. So you have, as a consequence, to adapt your collection to it.

Thank you very much.

Okay. Zuzanna?

Thank you for taking my questions. I have two. So, one is on the US. Just to take a step back, because, sorry, you've provided a lot of numbers and kind of I'm trying to get an idea how much the US market has been actually growing in Q3 so far, or year to date, because I don't think you provide the regional split for H1. And kind of related to that, surely people must have been buying a little bit ahead of the time, so I would be curious to hear your take on that.

And then secondly, I know it's not meant to be a call about the business as a whole, but you sound very positive, and I do recall that, over the years, I guess there have been quite a few times when you actually mentioned you were growing double-digit in certain regions, channels, but if I look at the results, really, in the past, over a decade, as a group, Swatch has not grown at a double-digit rate, apart from 2021, when we were comping off COVID. So how much should we take it with a pinch of salt? Or do you really think H2 is going to be much better for the business as a whole? I appreciate maybe the US, but obviously you have a high exposure elsewhere. So, yes.

It's spreadsheet analysing, we are entrepreneurs. I said that this is local currency, you might forget that we are producing in Switzerland, you already think we're going to put our production somewhere else.

No, I don't think of that. But we are looking a spreadsheets, but at the end of the day, you're organising this call to give us information. And I just do recall for, over the years, quite a few double-digit growth numbers cited and then not seeing them at the end of the year. So that's why I'm sort of trying to get to the bottom of that.

Zuzanna, again, I can remember over this ten years a lot of comments from analysts that were totally inaccurate and not working. I'm not predicting. That's why I never do a forecast on my calls. I never do a forecast. You don't see a forecast on profit. You say only what we try to achieve and the opportunities. And I can give you facts, and the facts are going to the moment where we are today. Now, I give you the fact for the United States, you can compare with the export numbers, but they are falsified [?] through the stock.

So when you take the half year results, the growth was near 20%. It was 18%, no, 15%. Excuse me, I was looking at retail. Retail was growing at near to 20%. So 15%. And if I look to year-to-date August forecast, it's over 20%, the year to date. So we are continuing to grow double-digit in this market. And the big part of the growth is coming from the mid-range and also from the lower end brands. Also, just to remind you that you are always critical, not you but…

No, I'm not critical. I'm, in fact, a very positive person by nature. But I want to ask, sorry, one follow-up, just to kind of put things a bit in perspective. So, okay, how much did US grow in H1,

constant currency? I don't mind constant currency, because you did minus eight as a group. So did the US grow? Because then I'm kind of thinking the fact that you may be growing to 20%, 30%, 50% now doesn't mean you're going to grow as a group. What was the US and H1?

Zuzanna, we gave the number in H1. How much was it, the growth at constant rates?

In the US.

Not in the US. I gave you the number for the US.

I would like to know the US, because if you did, as a group, minus eight, then what did the US do? You don't disclose regions for H1.

But I send it to you now. The United States had a growth for us that was 15% year to date [overtalking].

In H1, okay. But you did minus 8% in H1, so I appreciate US is great, but it would be helpful to know what the rest is doing, because it clearly does have an impact on your total group.

We are not quarterly reporting. This is [overtalking]…

Yes, but you must look at something, given that you just didn't report quarters but you just told us what the US is doing so far.

Okay, I'd tried to explain, and then we'll go to the next question. Zuzanne, I said China is recovering, step by step. It has been confirmed by others and the export numbers still on a very low level. I said also that the United States is continuing the growth and how we are coping with this situation.

The Swatch Group is not doing quarterly results, we are not reporting, and this call is not a subject to give you quarterly results or quarterly outlooks or half year results. This is clearly what has been said in this call. It is giving orientation about all the speculation of the United States. And as you heard, Jon Cox was asking me about China for the brand of Swatch. I gave him the information that there is no impact. So there is nothing else to be said from what we said in July and our half year results.

Okay. Thank you so much.

Luca Solca?

Yes. Hello, Nick. Just a couple of questions, if I may, and thank you for the call. I would like to know if, either directly or through the Swiss Watch Federation, you've been working together with the Swiss Federal Council to try and shape the negotiation with the American administration, and if you are, indeed, in contact with the Swiss government in this negotiation.

And the second question is do I understand correctly that price increases are going to be limited to the US, considering the import tariffs that you will now have to pay? But you also said something about avoiding sort of parallel [?] trade activity, how are you going to be avoiding that? And would you be increasing prices globally to some extent in order to maintain the price differentials? Or how else are you going to be able to control that there's no grey market activity going on? Thank you very much.

Okay, Luca. I said we have an index, it was the Swiss franc, and the United States, were quite low in this index because of the Swiss franc. So now, after this eventual price increase, if nothing is changing from Donald Trump, the index will be totally out of range of a danger of parallel. Our indexes worldwide are quite equilibrated, so there is no special measure to take. We were looking at it when we took into consideration how much we would increase the prices, at what levels we act. So there is no problem.

If you want so. But if the Swiss franc weakens further, of course we have to think about doing [?], but this is not limited, then, to the US. The Swiss franc, this we are looking at all the time. As I said, Turkey, there's so much inflation there. And the comparison, we constantly increase prices. India, every month we are looking at the indexes, and when we see that something is moving, we make price increases. We did it in Japan.

But we are never trying just to increase the prices, like some fashion houses did, and they made a mistake, just to take advantage from the consumer that he is asking for your product to improve the profit. We have to be fair towards the consumer, and we just try to equilibrate what we have in the Swiss franc as a disadvantage, to equilibrate this. This we are doing constantly, but this has nothing to do with what we are talking now. We are talking purely the United States. Now, the first question that you had, remind me?

It talks about coordination with the Swiss Federal Council, either directly or through the Swiss Watch Federation, so that you can help and shape the negotiations with the American administration, and represent also the needs of the watch industry in Switzerland.

Luca, if our government is scared of Donald Trump, which is a very transparent person, you know exactly what he is, you don't have to be scared. Can you imagine how scared they are of me? So if they try to avoid the direct contact from the government to Donald Trump, you can imagine that they avoid the direct contact to Nick Hayek.

Okay, understood. Maybe you and Donald could get along. I wonder.

You must understand, I like these people, I know them. But to show strength without arrogance, to show strength and to be able to respond. Perhaps you saw it, you're not in Switzerland, but when Donald Trump said, no, the gold will not be taxed, in Switzerland, all the newspapers, everybody, said, oh, for God's sake, that's very good. And I said, am I crazy what I read here? Now, we should just tax the gold that we export to the US, like he taxes the chips for Nvidia. We put 39%. It's a message that you send to somebody and say, listen, you say now, no taxes, but we say taxes for you, the US only. Because why he would not tax them? Because it's not in his interest.

So, in a negotiation with somebody who is used to do real estate negotiations, you might have bought an apartment or a house, I don't know, Luca, you know how this works. So you need a strong position. A strong position doesn't mean that you have to be nasty, or that you have to be threatening. No, you just take a strong position.

And unfortunately, they have opted in Switzerland to go the other way, to be scared, and, unfortunately, to show it. And, okay, now, I don't know what they do. We'll see. But we are acting

I appreciate that. It's very useful. Thank you.

And that's why it's not the call to give outlook in quarterlies, in profit, in how much more or less stock you have, etc. This we can reserve for meetings that we have. I know that some of you are coming with investors and meet with us, but here, is really stay focused on the main story, which was to give you some ideas how we see the issues and how we act. Thank you, Luca.

Thank you.

Okay. We have Mr Piral Dadhania.

Okay, thank you for taking my question. Good afternoon. I just was wondering if you could help explain the strength that you're seeing in the Canadian and Mexican markets in July, August. Is that local demand, or is that some price arbitrage or spill-over effect demand from US consumers, maybe when they're travelling? That was my first question.

And then secondly, just following up on the comment that you made, Mr Hayek, in terms of your distribution on cruise ships within the Caribbean area, is that material from a revenue contribution perspective? What percentage of revenues out of the Americas or as a percentage of total does that represent? Thank you.

Now, listen, it makes about 32% of the travel retail business in the United States, so it's quite substantial, but it is not huge. It is interesting for a Tissot, so it's reaching and going towards $100 million, which is already a good number, but it's not above. So it's not a huge alternative, but it's something that is especially interesting for the mid-range brands, as I said, Hamilton, Tissot and Longines.

Because for them, this business is quite interesting, and it's an indicator of how attractive the brands are on these ships. But it would not be a solution for us to say, okay, if, in the United States, you would start to sell 20% less, and then you compensate with Caribbeans. No, this was just an additional information that we have this opportunity on the ships. But we have also the rest. Europe, we have many Americans that travel to Europe and are buyers of products, VAT free. You have Hong Kong, you have people who are travelling traditionally also to Hong Kong and buying products. We only wanted to show, when I mentioned the Caribbeans, there are alternatives for American consumers who want to buy the products less expensive than it will be in the United States.

So, Mexico and Canada. No, Mexico and Canada was already growing in the first part, when it was before Donald Trump was talking about his taxes. Before the Liberation Day, we had, in Mexico, a very strong situation. Canada, a little bit less strong than in Mexico, but it continues in the same trend. We have not seen yet in Mexico and Canada a spectacular increase in turnover that would indicate that American consumers are going to buy there. So it is a healthy local consumer that buys our products, and is probably buying even more when he sees that, in the United States, the prices increase. They think this is an opportunity for them in their country to buy now, at the

Yes, that's not a question of the index, because if we take the index in the US and in Mexico, that's more or less the same. So we need [?] that the prices are not lower in Mexico than in the US.

Okay, that's interesting. When you take the index versus the Swiss franc, you see that there is no reason at the moment to run and to exaggerate, the savings are not so big to go to Canada or to Mexico.

Okay, yes, that's very good. While I have the floor, could I maybe ask a slightly more big-picture question, which is just to say that, historically, I think that Swatch Group always pursued a volume-led market share strategy, where price increases were always a bit more conservative, perhaps, than your competitors, based on the historical discussions that we've had, Mr Hayek. But more recently, and I think on today's call, it sounds like price for you, but also I guess for the wider market, is a bit more of a factor. So how should we think about Swatch Group's approach to price increases on a more normalised basis for the global portfolio annually? At what level of pricing do you intend to take going forward, if that makes sense?

Yes. Listen, we have not changed from our strategy. Of course, we were forced, because of the Swiss franc, to be a little bit more aggressive, but we are still making big differences and hesitating and taking a longer time to increase prices at Swatch, or at Hamilton or at Tissot. The lower you are in the segment, we are more careful with the price increases. However, when there is really a need, because we're always scared from parallel markets, we act and we do it.

And I must also say that the world has become less price sensitive on these products. That's what we see. Because the quality that you have at Swatch, or at Tissot now, or even at Longines, is so incredible. What you get as a product for that price, when you look at the mechanical watches that you have, or the solar watches from Tissot, or the mechanical watches from Swatch, the customer today is seeing the added value and is accepting the price increase. This is a difference, perhaps five years ago, six years ago, or ten years ago.

So here, we see that we have more flexibility in price increases, but the Swatch Group will not try to exploit the situation and just make price increases because we want to increase our margin the quickest possible. We still are aware that, even in the highest price segment, we have seen it with Chanel, you saw it, when you exaggerate with your prices, and the people don't understand why you increased the price, then you will have a problem as a brand. So we will always take to be cautious and careful. And if we have a doubt, we rather do not increase the prices than increasing the prices.

Very clear, thank you.

Thank you. Jean-Pascal Rolandez, s'il vous plait.

Hello, thank you for taking my question. It's about Hamilton. Is it not a good time to restart production of Hamilton watchers in the US? It has a very rich history, it has heritage, and I'm sure you would be proud to offer the first made-in-the-US Hamilton Watch to Donald Trump. And that

on an industrial scale, Swatch is the best. And I think Donald Trump should have a Swatch. The Pope, the late pope, he had a Swatch. So I think Swatch would be a good symbol for his idea to bring industries back into the United States.

But if you talk about Hamilton, Hamilton is one of the strongest growing brands worldwide. In the United States, in August, the forecast in August, is plus 23%. In July, they ended even plus 56%. Hamilton is a success story, not only in the US. Hamilton is strong in the rest of the world, and I'm not sure that, in the rest of the world, made in America is something that people would like. So if you tell me, come on, you forget about Swiss-Made, you make these products in the United States, first, I would doubt, because what you need to make Hamilton is the movement. The movement the Swiss-made. It's our movement. It's a high quality movement.

And they are strong in Japan. It's one of the strongest brands in Japan. In Italy, they are one of the coolest brands. You seek to change just because there is, during four years, Donald Trump in the US, you will just abandon a fantastic brand. And I agree with you, it has a legacy. While I would never do this. Why? I would never do this. You see Casio, that's important perhaps for all of you, Casio decided to launch a mechanical watch, I think, two months ago. A brand that never was seen to be mechanical. The quality is okay. It's the quality as it is. But this shows that mechanical watches in the young generation are more and more in demand.

And if Casio goes into mechanical with a movement, we don't know where it's coming from but it's not Swiss-made, and it's apparently not Japan-made, then you see how strong this argument is. And Hamilton has huge potential, staying with what people trust, a Swiss watch, independent of the price segment. And why should we go and please Donald Trump? Donald Trump respects people who are fighters, because you can only make a deal with somebody if you feel some resistance. You have not a lot of fun trying to make a deal when the other guy is saying, okay, I accept, I do. Come on, that's boring. You have to fight for it.

And then, of course, he wants to be there as a winner, but I think it would be like the Louis Vuitton factory in Texas. I don't know if the consumer really understands what they do with a Louis Vuitton bag made in the USA. I don't know. So that's not our strategy. But thank you for your input. All ideas and thinking is allowed, of course. No problem. Thank you.

Thank you.

So now, the two last ones are Louise Singlehurst and Antoine Belge. And then, unfortunately, we have to move on. Louise?

Okay, Louise, we are prepared. We can implement at any time. So we are talking openly. In the United States, you can make and implement pricing cases very quickly, so you don't have this legal requirement. In some countries, you have to announce it two months or three months in advance.

It's at two weeks.

In the United States, it's two weeks. So, we are ready, we have everything planned and, at a certain moment, we will say, go, we do it. I cannot tell you now the exact date when we do it, but we are ready to do it, everything is prepared. It's just that we want to give some time that perhaps, who knows, there will be a change in one way or another.

Now, the prices, every brand has a different transfer price and has a different margin structure with retailers. So you have some brands that have 35%, others have, Keystone, 50%. So it's a very individual calculation per brand where we come to this price increase for the brand. So it's not just, oh, we have the very expensive watches, so here we increase by 10% or 15%, because the consumer will swallow that. No, no. We have been carefully looking about the margin structure, the prices of the competitors, by the way. And then, we come, brand by brand, to this proposition.

By the way, the brand presidents are in the driver's seat. They are doing this together with us and with the people in the United States. We have an affiliate, as well as country managers, as well as brand managers, and we do, carefully, the evaluation, how we fix the price at the right level in the United States. That's how we are operating. Okay? Hello, Antoine Belge, you will be the last one in the line.

Hi, can you hear me?

Yes.

All right, thank you. So, actually, I'm here because my colleague, Melania Grippo, had technical issues, so I'm going to ask the question she wanted to ask. There's only one. So, you mentioned this notion of transfer price, and I think we don't know exactly how much is that transfer price. And I think it's quite important, because you reassured us today that 39%, which is a bit of a worst case, you could manage. So let's say that if, one day, that number becomes 20%, we need to understand the delta and what will be the benefit. So, I know if I say that if you're taking a base of 100 for your USA, I don't know, is the transfer price, I don't know, one-third of that, 25%?. So any clarification on that, because I think it's quite important that we, at least as Swatch shareholders, have been asking us, in the last couple of weeks, how to calculate the impact.

an indication. I came up with 25% or 33%, comparing the 39% to the 5% to 10%.

Antoine, I understand, of course, that you want to have this, but the important message to you is that we can live with a price increase between 5% and 10% without penalising the consolidated margin of the group. And this is in the range where we think it's not dangerous, touching our volumes, not for the enterprise, and not for any brand of the Swatch Group. This is our objective, and that's the message that we wanted to give you.

So this flexibility we have inside the company, I understand your side that you want now to have the calculation for Hamilton, for Swatch, for Longines, for Omega, but you don't know the margin either. Also, there, we have some discussions, and we know what brand has what kind of margin with what kind of retailer. These are things that we keep for us, but the overall result is important. That's what we aim for, and that's the dimension. Mr Lopez, do you want to say something?

Just technically, you talk about 39%, but don't forget, that's only 29% on top, so we already had the 10% at that time when we increased the prices. So that's 29% on top, not 39%.

Yes, he is right. He's right, we have to absorb only the additional 29% on top, yes.

Thank you very much. Thank you very much.

Okay. Listen, to all of you, I know each time I call you and I talk with you want to know what is the outlook, what is the quarterly, what is the forecast for half-year? We really wanted to give you an indication, because you hear not a lot from the Swiss Watch Industry. Not many companies are expressing themselves. And you hear many, many doomsday scenarios. And we want to just to give you an insight, what Swatch Group is doing, is planning, what's the reasoning behind, and what's the assumptions for the American market.

Now, again, I cannot say if in December or November, in the United States, you will have a total breakdown. I don't know what is happening. I don't know what the FED is happening in the United States, what is happening with the liquidity in this country. So it was really to do with what you all were asking us, can we talk with the management when there are some issues that we want to clarify? And we have really felt the need to give you some information. Now, that was the purpose of this call, and nothing else. So not sending a hidden warning, not sending hyper-optimistic messages that the Swatch group will do 10 billion profit, even more than turnover, though I would love to be able to do that.