Strong franc, Olympics expenses hit Swatch's first half

ZURICH, Switzerland - Swatch Group said the strong Swiss franc and expenses for the Olympics weighed on net profit in the first half but it expected a positive second half of the year on good demand in the United States and Japan.

The world's largest watchmaker is grappling with an unfavourable currency environment and sluggish demand for high-end watches in the important Chinese market where a crackdown on gifts for favours has hurt watch sales.

"Particularly in the USA and Japan, sales continue their very positive development. Also, the stronger sales trend noticed on the Chinese mainland continues," the group said in a statement released on Tuesday.

"In contrast, the situation in Hong Kong is affected by a number of uncertainties," Swatch said without elaborating.

Net profit at the group fell to 680 million Swiss francs (443 million pounds), just below a forecast for 690 million francs in a Reuters poll.

Gross sales rose 4 percent to 4.347 billion francs, also short of a 4.438 billion forecast in the poll. When excluding currency swings, they rose 8.5 percent to 4.535 billion francs.

Swatch Group said currencies should have less of a negative impact in the second half due to an easier comparison base. The company said it would stick to its strategy of gaining market share.

French luxury goods firm Hermes last week posted a slowdown in second-quarter sales growth, hit by a slump in Japanese demand and adverse changes in foreign exchange rates.