Shares in Swatch Group experienced a decline after the company released its 2023 results, failing to meet analysts' expectations. As of 0958 GMT on Tuesday, shares were trading 1.6% lower at CHF209.50, with a previous drop of 3.5% earlier in the session.
Strong Net Profit and Sales Growth, but Below Expectations
Despite positive growth, the Swiss watchmaker reported a net profit of 869 million Swiss francs ($999.8 million), up from CHF807 million in the previous year. However, sales, which grew by 5.2% to CHF7.89 billion, were affected by an unfavorable currency environment as anticipated.
Meanwhile, the operating profit increased to CHF1.19 billion from CHF1.16 billion. Although both sales and operating profit missed analysts' expectations of CHF7.96 billion and CHF1.34 billion, respectively, according to the Visible Alpha consensus.
Concerns in the Luxury Sector
Swatch Group's results do little to soothe concerns in the luxury sector as other companies, including Hugo Boss and Burberry, also experience volatile prints. Analysts Thomas Chauvet and Lorenzo Bracco from Citi noted that the industry's underperformance persists.
Slower Growth in the Second Half
Stifel analyst Rogerio Fujimori observed that Swatch Group's sales performance suggests a slowdown in growth during the second half of the year, dropping to 8% from 18% in the first six months.
Unfavorable Exchange Rate Movements Forecasted
While Swatch Group expects lower- and medium-price segments to benefit from local currency effects throughout the year, it anticipates continued unfavorable exchange-rate movements.
Reduced Sales and Earnings Outlook for 2024
Due to the missed targets and limited outlook comments, consensus estimates for sales and earnings before interest and taxes for 2024 are likely to be lowered, which could negatively impact the stock, according to Citi.