Core Viewpoint - Swatch faced backlash due to a controversial advertisement perceived as racially insensitive towards East Asians, prompting a public apology and removal of the related materials [1][3]. Company Summary - Swatch Group is one of the largest watch manufacturing and distribution groups globally, with brands including Longines, Tissot, Omega, and Breguet [4]. - The company reported a sales decline of 11.2% year-on-year for the first half of 2025, with net profit plummeting 88% to 17 million Swiss francs, resulting in a net profit margin of 0.6% compared to 4.3% in the previous year [6]. - The Chinese market is the largest regional market for Swatch Group, generating 2.63 billion Swiss francs in net sales in 2023, accounting for 33.3% of total sales [6][8]. Industry Summary - The Swiss watch industry faced challenges from a strong Swiss franc and declining global demand, exacerbated by the recent increase in tariffs imposed by the Trump administration on Swiss imports [10][12]. - The U.S. is the largest export market for Swiss goods, with 19% of Swiss exports going to the U.S. The watch export total for 2024 is projected at 26 billion Swiss francs, with the U.S. accounting for 16.8% of this figure [11]. - Analysts warn that maintaining a 39% tariff could be devastating for many Swiss brands, including Swatch, which derives 18% of its sales from the U.S. market [13].

Group 1 - The core issue revolves around Swatch's advertisement featuring a model making a "slant-eyed" gesture, which has been interpreted as racially insensitive, leading to significant backlash from Chinese consumers [5][6]. - In response to the controversy, Swatch has taken immediate action by removing all related materials globally and has issued an apology for any offense caused [1][2].