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Key takeaways

  • Swatch Group must revamp its brands and product lines to appeal to modern consumers and halt declining profits.
  • The company's stagnant brand portfolio and the lack of major acquisitions since 2013 are major concerns for investors.
  • To prosper again, Swatch needs more decisive leadership, including a commitment to innovation and improved corporate governance.

Swatch Group faces major challenges and needs a comprehensive strategic review to reverse declining profits and regain investor confidence. Although the company produces high-quality watches, analysts argue that its brands have become irrelevant and outdated. The lack of innovation since the death of founder Nicolas Hayek in 2010 is a major concern.

Hayek's visionary leadership transformed the watch industry in the 1980s with affordable, innovative designs and expanded Swatch into the luxury segment through acquisitions such as Blancpain and Breguet. However, under the leadership of his children, Nayla and Nick Hayek, the company has not made any major acquisitions since 2013, leading to a stagnant brand portfolio.

Investors' concerns

Despite claims by Swatch that the company is constantly engaged in research and development, investors believe that the company's brands lack new appeal and need revitalisation.

Critics also point to Swatch's dual share structure as a factor hampering the company's adaptability, as it gives the Hayek family disproportionate voting rights despite their limited equity stake.

Improvements in governance

The recent proposal to add Andreas Rickenbacher to the board is seen as a positive step towards improving governance, but experts call for further changes, including more independent directors and a market leader with international experience.

Activist investor GreenWood calls for board reforms and greater shareholder representation. Their latest proposals are aimed at diversifying the board and broadening its perspectives. Swatch acknowledges GreenWood's request, but is still awaiting evidence of their recent share acquisition.

Need for bolder strategy

The company's share price has risen slightly this year after better-than-expected sales figures, but still lags behind competitors such as Richemont and Watches of Switzerland. Ultimately, Swatch needs to embrace a bolder strategy that focuses on innovation, brand renewal and improved corporate governance to regain its position as a leader in the watch industry.

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