New strategy queried as investors call time on Swatch

Emirates Team New Zealand managing director Grant Dalton, left, receives the sponsors watch Omega from Mark Watson managing director SWATCH group Australiasia. Photo / Brett Phibbs

Three years ago, Swatch Group was riding high. The world's largest watchmaker, known for its colourful plastic watches as well as upscale brands including Breguet, reported record gross sales.

Then, in several newspaper interviews in 2015 and in early 2016, chief executive Nick Hayek announced he was taking the company in a new direction, launching a battery for electric vehicles with the goal of reaching US$10 billion-$15 billion sales by 2020.

Investors called the plan expensive and unrealistic and with 2016 group sales predicted to be below last year's 8.45 billion Swiss francs ($11.94b), inventory rising and Hayek refusing to announce savings despite slowing sales, they are questioning the group's strategy.

Urs Beck, a fund manager at EFG Asset Management who has Swatch among his top 10 holdings, said Hayek had lost some credibility with investors because his forecasts had not always come true.

"When he says 10, you know it can be 5," Beck said.

"There is little information on the Swatch battery. Hayek is known for giving fancy forecasts that often only materialise in the long term."

Carine Menache, who runs a family investment company and has Swatch among her biggest holdings, said it had not been an easy ride, but she had nevertheless added to her position when the share price fell below Sfr250 in August.

"It seems to be coming back, but hope is not an investment strategy," she said, adding that Hayek was a good manager but should diversify more into luxury accessories and launch more limited editions or smartwatches.

"I have not heard that they were cutting costs, but they should probably do that," she said.

A spokesman for Swatch Group declined to comment on criticism of its strategy but said in an emailed statement the company was not planning to reduce production capacity now or in the future.

The share price for the group has fallen 12 per cent so far this year which follows a 21 per cent drop last year.