ZURICH: Swatch Group AG is bracing for economic upheaval to persist this year, with turmoil in the Middle East hitting the watchmaker just as it grapples with the impact of a strong Swiss franc and tariffs.
The company has more than 200 stores in the Middle East, which excluding Saudi Arabia accounted for 5% to 10% of sales last year, according to chief executive officer (CEO) Nick Hayek.
While they remain open, the drop-off in tourism will affect a key trading period at the end of Ramadan this week.
That will “certainly have an impact,” Hayek said at press conference at the company’s headquarters on Wednesday, suggesting Swatch would adjust supply in the event that a long war crimps demand.
“In the past there’s been conflicts in the region and then people flocked back there again.”
The timing is tough for Swatch and the wider luxury sector, given the Middle East was a rare bright spot last year amid weak demand in China and the fallout from US President Donald Trump’s tariffs.
Shares of Swatch have fallen about 16% since the start of the conflict in the Middle East.
Still, Hayek said tourism could get redistributed elsewhere including to Europe, which could boost Swatch’s sales there.
He also said in times of uncertainty, customers spend money on discretionary items for their loved ones, so brands like Tissot, Swatch, Hamilton and Longines may see more demand.
The CEO was speaking at the Swatch’s media event in Biel, Switzerland to mark the publication of its annual report. The watchmaker’s operating profit margin tumbled by more than half in 2025.
Swatch saw demand pick up in recent months, and on Wednesday restated the upbeat guidance it gave in late January.
The company expects “very positive sales and volume developments” which it said will help boost profitability.
However, Hayek reiterated his warning about the impact of the strong franc on the country’s businesses, which he said was being underestimated by the Swiss National Bank.
The haven currency has appreciated 15% against the dollar since the start of 2025.
He also defended the company against investor criticism about the high cost of its policy to maintain jobs, production and inventory ready for an upturn.
“We want to retain flexibility,” he said, adding that sometimes comes at the expense of profitability.
In its annual report, Swatch hit out at tariffs and trade disruption that hurt the company and the wider industry last year.
“We are committed to Swiss Made and will remain so,” Swatch board chair Nayla Hayek said in the report.
“There is no question of us producing our watches in other countries simply to please the local authorities.” — Bloomberg
