Swatch Group AG cut 2,400 jobs, a record cull, and trimmed its store network as the Swiss watchmaker became unprofitable for the first time.
The maker of Omega and Longines timepieces said on Tuesday it accelerated plans to shut stores permanently in Hong Kong as well as shops that sell its colorful namesake brand and Calvin Klein timepieces. Sales in the six months through June plummeted 43%.
In a break with its strategy during previous crises such as the 2009 financial downturn, Swatch is leaning more on slashing jobs. Chief Executive Officer Nick Hayek has said that during hard times, the problem with cutting jobs is it’s difficult to find qualified staff when the market rebounds. It appears this year is different.
“Winston Churchill said, ‘never waste a good crisis,’ and that’s exactly what we’re going to do, especially in the second half of the year,” Hayek said in prepared video remarks.
The job cuts were predominantly at the shops, as Swatch held on to production workers. The company closed 260 stores and now has about 1,800.
The stock was little changed after a 2.7% gain in early trading. Analysts applauded how inventory remained stable despite the drop in sales.
The CEO said Swatch expects a profit this year as countries ease lockdown measures, shops reopen and travel resumes. The company’s first-half operating loss of 327 million francs ($347 million) was twice as big as analysts expected. In the second half, Swatch plans to introduce new products, including James Bond Omega timepieces and a Tissot smartwatch.
Swatch announced the end of its 22-year-old contract to sell Calvin Klein watches in October, and many of the closures were related to that decision, Hayek said. The company’s plastic namesake brand is also reducing its reliance on brick-and-mortar stores and will rely more on
The company will be shutting further stores going forward as it focusses more on online growth, according to Rene Weber, an analyst at Bank Vontobel AG.
“A big step has been made, but it will be ongoing,” Weber said. The Swatch brand alone had more than 500 stores at the end of last year.
Swatch forecast that the industry will recover quickly as consumers catch up on shopping after lockdowns, as seen in China and Korea.
The month of June already was profitable, thanks to pent-up demand in mainland China, where sales rose at a double-digit rate in May and June.
Still, only about half of its employees in Switzerland have returned to work full-time. Some 6,000 employees were on short-time work on average last week, while about 2,500 were taking unused vacation or reducing overtime, according to Chief Controlling Officer Peter Steiger.