Living the life of luxury has become a bit more difficult around the world—and luxury brands are feeling the pain. Swiss watchmaker Swatch, which creates higher-end timepieces from its Tissot and Omega brands, is the latest to take the hit.
Its shares fell off a cliff after CEO Nick Hayek let it be known that earnings in the first half of the year were down 50 percent to 60 percent. That will likely equate to a 22 percent drop in net income. The stock’s 13 percent drop took it to its lowest level in more than six years, Reuters reports. In addition, the tragic deaths in Nice, France, on Thursday could also mean fewer dollars being spent across much of Europe.
“In the early beginning of the year, the signals were positive in France and Switzerland that tourist bookings would pick up again in spring, and 5 percent sales growth in local currencies in these countries was possible,” said Hayek, according to Bloomberg. “After what happened in Nice last night, I can say I will have to revise that downwards.”
The announcement was unscheduled, according to TheStreet.com. Hayek blamed poor sales in Hong Kong, France, and Switzerland for the downturn. In a bit of good news, though, he said that sales in mainland China were going “positively.”
Hayek also isn’t known as a cost-cutter and has said that he doesn’t plan on having layoffs, chopping prices or shifting investments since those could hurt the brand’s long-term financial goals. Swatch noted this in its statement Friday, pointing out that this was part of why it had financial difficulties in the first half.
The financial fall was “obviously due to the decrease in sales but also to the tradition and the industrial long-term philosophy of the Swatch Group to consider its employees not just as a cost factor but to keep them…to maintain investments in new products and marketing and to pursue a defensive price increase policy,” Swatch said in a statement, according to The Wall Street Journal.
Other watchmakers aren’t doing much better. Richemont dropped 6.1 percent, LVMH fell 3.2percent, and Kering is down 2.4 percent. Perhaps consumers are getting their time from their digital devices and watches are not as necessary as they once were.