Time’s up for Swatch?

Swatch Group CEO Nick Hayek, son of founder Nicolas Hayek. Hayek Jr dropped out of university and briefly pursued a career in filmmaking. Keystone / Peter Klaunzer

Chaotic scenes erupted from New York to Zurich, Paris and Tokyo in May as collectors and resellers queued, sometimes for days, to buy brightly coloured plastic pocket watches.

Fist fights broke out, stores were forced to close and police used tear gas in at least one city to disperse crowds trying to get their hands on a Royal Pop watch, created by Swatch and Audemars Piguet.

The frenzy was a reminder that few companies understand hype better than Switzerland’s Swatch Group. But the world’s largest finished watchmaker, whose 16 brands range from $50 (CHF40) plastic Swatches to high-end Breguet timepieces costing tens of thousands of dollars, is facing one of the most difficult periods in its history.

The group’s net profit collapsed by almost 90% to just CHF25 million ($32 million) in 2025, having fallen 75% in the preceding year. The strong Swiss franc is squeezing margins, which more than halved last year, while a luxury downturn in key markets such as China is hurting sales. Swatch’s market capitalisation has fallen from nearly CHF20 billion a decade ago to less than CHF11 billion today.

The financial downturn at the family-controlled company has heightened a sense of disenfranchisement among its public investors, many of whom say Swatch’s version of shareholder capitalism treats them as irritants rather than co-owners.

“Right now there is a clear disregard for minority investors,” says Steven Wood, chief executive of US-based GreenWood Investors, who has campaigned since 2024 to give outside investors a voice in the group’s boardroom and is bringing legal proceedings against the company.

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Swatch remains firmly controlled by the Hayek family through a dual-class share structure. Chief executive Nick Hayek and chair Nayla Hayek are the son and daughter of founder Nicolas Hayek, who once quipped that the company “sells watches, not shares”.

Some Swiss agree with Wood’s assessment. “It’s among the worst governance structures we see in Switzerland,” says Vincent Kaufmann, chief executive of Ethos, a non-profit group founded by Swiss pension funds.

He adds that Hayek domination of the board means there has been no meaningful independent oversight of the company.

But for many Swiss, the company occupies a special place in the national imagination even if it has been a disappointing investment. They recall how, in the early 1980s, founder Nicolas Hayek in effect saved the country’s watch industry from a flood of cheaper battery-powered watches in the so-called quartz crisis – a turnaround still regarded as one of Europe’s greatest industrial rescues.

“They don’t make money because [Nick Hayek] protects Swiss jobs,” says one admiring long-term domestic Swatch Group shareholder.

The company sponsors major sporting events and remains embedded in popular culture, while a manufacturing ecosystem that stretches across Switzerland, operating from more than 150 production sites, is a powerful source of national pride.

The family has long maintained that a focus on short-term financial targets and maximising value for shareholders is inappropriate in an industry so dependent on skills and craftsmanship.

Swatch Group said in a statement that without its domestic manufacturing and workforce “there would be zero return, neither for shareholders, employees nor clients”.

But that stance was easier to justify when sales and profits were buoyant. Peter Kunz, professor of business law at the University of Bern, believes the challenge from Wood represents a watershed moment.

“This is the very first time the family has really been challenged – including in court,” he says.

Symbol of Swiss industrial identity

In the 1990s, in a hotel near the Jura Mountains that anchor Switzerland’s watch industry, Nicolas Hayek gave 400 Swatch Group managers a lesson in how to project power.

During a question-and-answer session, a young Omega employee named Oliver Müller stood up and asked the Beirut-born, cigar-smoking patriarch whether the industry’s “made in Switzerland” appeal was being undermined by the use of some Asian-made components.

The room froze. Hayek asked Müller to repeat his name, appeared to write it down, and then spent 15 minutes publicly educating him about Swiss manufacturing, competition and national identity.

During the break, Müller was summoned to meet him. Colleagues assumed he would be fired. But Hayek shook his hand, telling him that “we need people like you, who are daring enough to ask such questions”.

The story captures much of what made Hayek, who died in 2010, one of Europe’s great postwar industrialists: theatrical, combative, charismatic and confident enough to engage directly with dissent.

“He had a vision,” says Müller, who went on to found Swiss consultancy LuxeConsult. “The media, the financial world, the buyers – everyone bought into his story.”

Since its creation Swatch Group has represented an alternative vision of capitalism. While many western companies outsourced manufacturing to cheaper locations, Hayek argued that Switzerland should continue making things.

“We must build where we live,” he told Harvard Business Review in 1993. “When a country loses the knowhow and expertise to manufacture things, it loses its capacity to create wealth.”

Under his leadership, Swatch Group became a symbol of Swiss industrial identity, and his worldview is shared by his son, who succeeded him as chief executive in 2003.

Like his father, Nick Hayek argues that quarterly reporting encourages destructive short-termism and that public markets often misunderstand industrial strategy.

The junior Hayek, who dropped out of university and briefly pursued a career in filmmaking, also has some of the founder’s flair for provocation, smoking cigars at press conferences and sparring with analysts. He once told dissatisfied investors they were welcome to take their money elsewhere.

One year, Swatch Group published its annual report in Swiss German – a dialect with no standard written form – and another year printed it in type so small that readers needed a magnifying glass to read it.

While both men relished confrontation – Nicolas Hayek once retorted to analysts that he had become a billionaire by doing “the opposite of what you recommended” – there have been flashes of vindictiveness during the son’s tenure.

Two Swiss publications have told the FT that lucrative advertising was withdrawn for a while after critical coverage. “These [adverts] pay salaries,” says one of the people involved. “It was a bit painful and unfortunately we are more careful now.” Swatch Group said it was free to decide where to spend its advertising budget.

This year, Swatch issued an open letter in response to a widely followed report by Morgan Stanley and LuxeConsult that had highlighted Swatch’s loss of market share and questioned profitability at its Longines brand. The company said Longines is outperforming rivals and remains profitable, though without providing detail.

“When a listed company goes after an analyst house that way, it tells you a lot about the internal pressure,” says Jonathan Siboni, chief executive of brand adviser Luxurynsight.

At its full-year results in January, Hayek talked of operating income recovering to CHF500 million-CHF600 million “or more”, a big uplift from CHF135 million in 2025.

Analysts say that similarly bullish claims have often failed to materialise in the past. The company said his statement did not constitute guidance or a forecast.

Commercial difficulties

The company’s sensitivity to outside scrutiny and criticism has grown more acute as its commercial difficulties have mounted.

Some of these are cyclical. Swiss watch exports have weakened following a post-pandemic boom in spending on luxury goods. Demand in China, once more than 40% of total sales, has slowed sharply. The strength of the Swiss franc has made its products more expensive in other countries.

But analysts say some of its most prestigious brands are losing ground as luxury spending narrows to a small group of high-end brands.

“Swatch’s core portfolio – Omega, Longines and Tissot – is more exposed to aspirational middle-class consumers, who have been squeezed by inflation and economic uncertainty,” says Siboni.

Analysts believe Omega, once the industry’s undisputed number two premium brand behind Rolex, has slipped behind Audemars Piguet and Patek Philippe. Swatch Group said this was “purely speculation” but declined to provide current market share data.

Another criticism is that Swatch has under-exploited Breguet, the preferred timepieces of Napoleon Bonaparte. Industry estimates suggested it remained lossmaking last year.

Morgan Stanley and LuxeConsult estimated Swatch’s overall share of the Swiss watch market fell from 26.4% in 2019 to 16.1% last year.

Swatch said the report contained “extensive factual inaccuracies and methodological inconsistencies”, but does not publish revenue, profit or market share figures by brand.

The contrast is also stark in jewellery, where Swiss peer Richemont has emerged as a market favourite thanks to the growth of Cartier and Van Cleef & Arpels. Swatch Group’s Harry Winston, acquired in 2013, remains a far smaller contributor to its growth.

“I didn’t feel they were hiring the right expertise to lead their brands,” says one European institutional investor who sold out of the stock several years ago. Unfortunately the son is not the same visionary as the father, in my opinion.”

Governance issues

Such frustration has spilled into the debate around the group’s governance.

Critics argue that Swatch Group behaves more like a private family company than a listed entity with public shareholders. The Hayek family and linked entities own 26% of the equity capital but control 44% of the voting rights mainly through large holdings of the registered shares.

Its board remains unusually insular for a company that generates most of its revenues outside Switzerland. Nick, Nayla and her son Marc Hayek hold three of the eight board seats. Daniela Aeschlimann, who represents the shareholder pool that underpins family control, holds a fourth.

The remaining four directors are all Swiss and three of them have served for more than 15 years, well in excess of corporate governance norms. Swatch Group said it considered competence, integrity and experience as determining factors for non-executive directors.

Until Andreas Rickenbacher joined the board this year, Ethos did not consider a single director to be truly independent. Executive directors sit on the board’s audit and remuneration committees.

Wood, the US investor, first approached the Hayeks in 2024 about a board seat to represent holders of the group’s bearer shares, which represent 55% of the group’s capital and are mostly owned by non-family investors.

Despite support from bearer shareholders at last year’s annual meeting, the Hayek-controlled voting bloc opposed him on the grounds that he was not a Swiss citizen or resident. Wood responded with a lawsuit.

At this year’s meeting, held last month, Swatch Group sought to placate investors by nominating Rickenbacher, a former regional politician, as an independent director and representative of bearer shareholders.

International proxy voting advisers ISS and Glass Lewis, along with Ethos, backed Wood’s renewed bid and more than 80% of bearer shareholders ultimately backed him.

But his nomination still had to pass a vote of all shareholders, at which the Hayek family blocked his candidacy and installed Rickenbacher as an independent director, but without a mandate to represent bearer shareholders.

According to calculations by Ethos, several other key resolutions would not have secured backing from other shareholders this year.

The company said it complied with Swiss corporate law.

Kaufmann, the Ethos chief executive, argues the issue is not that Swatch Group should abandon its role as an industrial steward. “We are trying to defend Swiss industry by creating counterweights to a controlling shareholder concentrating all powers,” he says.

In response, Wood has broadened his challenge. “There are further avenues we are pursuing, including legal ones,” he says. “It does not have to be me that ultimately sits on the board, but I will continue to fight for bearer shareholders to have a voice.”

Corporate governance concerns extend beyond financial performance and board composition. Ethos has also questioned executive pay levels; Nick Hayek received CHF4.85 million in total remuneration last year, despite the profit collapse, and Nayla Hayek CHF3.04 million. The company said overall pay did not increase in years where profit fell.

Nick Hayek, who is 71 and has run the group for almost a quarter-century, has given little indication of when he plans to step aside. Industry speculation about potential successors often centres on Nayla’s son Marc Hayek, the chief executive of Blancpain, who joined the board in 2024. The company said succession scenarios were not discussed in public, adding that “the future will tell” with regard to Marc.

Long game

There have been some recent signs of positive, if incremental, change.

Analysts are more optimistic about Gregory Kissling, the new head of Breguet. Brands such as Tissot are improving and have received more investment. The latest Swiss watch export data for April shows signs of stabilisation in Asia.

The company said it hoped to hold an in-person annual meeting – the first since 2019 – next year and has hinted it may hold an investor day.

For all the criticism, the group retains the ability to generate cultural excitement. The MoonSwatch collaboration with Omega became a global phenomenon in 2022 and industry estimates suggest Royal Pop could generate CHF150 million-CHF170 million of revenue, although it is unlikely to materially alter Swatch Group’s overall financial trajectory.

The lacklustre performance and the challenge from Wood may still represent the most serious test of the Hayek family’s control in decades. “The company has never been under so much pressure,” says Müller, of LuxeConsult.

But Kunz, at the University of Bern, believes the family is betting that time is on their side, given that a final ruling in Wood’s legal action could take years.

“They assume, perhaps correctly, that he won’t stay for years,” says Kunz. “It is pragmatic and even a bit Machiavellian. But the Hayeks can play a long game.”

Copyright The Financial Times Limited 2026