Swatch Group Refutes Morgan Stanley’s Watch Profitability Report
The Swatch Group, a leading Swiss watchmaker, has publicly challenged Morgan Stanley. The company sent an open letter to the major investment bank. This letter directly addressed a recent industry report. That report questioned the profitability of several Swatch Group brands.
The Core Dispute
Swatch Group CEO Nick Hayek signed the strong letter. He labeled parts of Morgan Stanley’s report as “fake news.” The report suggested that Longines, a key Swatch brand, was “barely profitable.” Hayek found this claim deeply inaccurate and damaging.
Morgan Stanley analysts Edouard Aubin and Melanie Flouquet co-authored the report. Swatch Group believes these analysts lack a true understanding of the watch industry. They stated the report contained “erroneous information.”
Longines: A Profitable Powerhouse
Swatch Group firmly asserts that Longines is “extremely profitable.” They describe the brand as a significant “cash cow.” In 2022, Longines achieved sales of 1.11 billion Swiss francs. This performance places Longines as the fifth-largest Swiss watch brand by sales.
Longines holds a dominant position in the crucial $800 to $5,000 price segment. This market area is vital for luxury watch sales. Swatch Group highlighted strong operating profit margins. These margins for comparable brands, like Omega, Tissot, Rado, and Mido, typically range between 25% and 30%. This financial data directly contradicts Morgan Stanley’s assessment.
Broader Industry Implications and Swatch Group’s Stance
The controversial report also raised profitability concerns for other Swatch Group brands. These included Tissot and Rado. Swatch Group strongly denies all such allegations. They maintain these brands are financially robust.
The company views Morgan Stanley’s report as a direct attack. It believes the report targets the entire Swiss watch industry. Swatch Group’s own financial results for the first half of 2023 showed strength. Their operating profits increased by 10.5%. Net sales also saw a 12.6% rise. This data underscores the group’s overall positive financial health.
Calls for Correction and Future Steps
Swatch Group is demanding a retraction and correction of the report. CEO Nick Hayek emphasized the importance of accurate financial reporting. He stated that uncorrected information could lead to legal action. This dispute highlights a significant tension. It shows friction between financial market analysis and corporate financial transparency within the luxury goods sector.
Accurate financial insights are critical for investors and the market. Swatch Group seeks to protect its reputation. It also aims to uphold the integrity of the Swiss watchmaking industry.
