Swatch Gets Bullish as Activist Pushes for Change

American activist investor Steven Wood’s one-man mission to overhaul the governance and culture of Swatch Group AG just became a lot harder.

The Swiss watchmaker and its plain-talking, cigar-smoking chief executive officer, Nick Hayek, may have spent most of the past two years disappointing shareholders with tumbling sales and shrinking profits, but last month they surprised with an upbeat outlook and bullish predictions of a recovery this year.

The market reaction was dramatic. The company’s shares — the most shorted in Europe — had their best day ever, and are up 15 percent this year.

It was a timely riposte from Hayek, the son of Swatch’s founder, as Wood’s push to get on the board enters its second year. The CEO says he’s not troubled by the campaign, but recent statements suggest the company isn’t taking any chances. Days after the updated forecasts, it nominated its own new board member, which it said would strengthen governance.

The implied message from Hayek to shareholders: Trust him and don’t side with the outsider.

The Hayek name is synonymous with the Biel-based company and the family is the dominant force, with 44 percent of voting rights and three board seats. The CEO has a testy relationship with investors and enjoys baiting them, once with a gimmick to publish the annual report in a format so small it required a magnifying glass to read it.

Wood, the founder of US-based Greenwood Investors, argues that change is needed, particularly to loosen the family’s grip. He says he has support, and it may not be a one-man mission for much longer. Geneva-based Ace & Company plans to back Wood at this year’s AGM, as does BWM AG, according to people familiar with the matter.

The activist campaign comes as Swatch deals with a challenging market. Swiss watch exports haven’t been this weak in more than 40 years, and 2025 sales at the company were the lowest since 2010, excluding the Covid-induced slump.

Swatch’s reach into the industry is extensive, stretching from luxury names like Omega and Harry Winston, to Longines and its namesake low-cost brand. It also owns numerous component manufacturers.

In addition to external pressures — a strong Swiss franc, sluggish demand in China and raw material prices — some say the company has underperforming brands and are critical of its huge inventory stockpile. Despite the recent gains, the shares are down about 43 percent from their post-pandemic peak.

“We wonder whether Swatch Group will remain the ultimate value trap as long as management refuses to acknowledge that the watch market has undergone a crippling downsizing — particularly in the entry-level segment — and to adjust production capacity accordingly,” said Jean-Philippe Bertschy, an analyst at Vontobel.

Wood’s focus is governance concerns, and he’s not the only critic.

Last year, proxy advisor Institutional Shareholder Services recommended shareholders vote against the reelection of directors, citing a lack of board independence. Advisor Ethos Foundation, which says Swatch is “not in line with best practices,” backed Wood when he tried to get on the board in 2025.

Swatch was formed in the 1980s in a merger guided by Nick’s father, Nicolas Hayek. It takes pride in its Swiss heritage, and to many it almost single handedly saved the watch industry during the quartz crisis, when competition from battery-powered Japanese timepieces destroyed businesses and jobs in Switzerland.

A dual-class share structure means the Hayek’s registered shares have outsized voting power relative to their stake. This form of governance has come under pressure in Switzerland, and some firms have abandoned it.

Hayek, 71, has been CEO since 2003 and a director since 2010.

His sister, Nayla, is chair of the board, and has had a seat for 30 years. Of the remaining five board members, one is Nayla’s son, and three others have been there for at least 15 years.

Wood, who has a 0.5 percent holding, was blocked from joining the board last year. He’s argued that the decision breached Swiss corporate law, which Swatch rejects.

The investor also says there’s a “culture of caution,” with few inside the company willing to say anything at odds with the family.

“The Hayeks are very important for the history and the future of Swatch,” he said. “But I strongly believe that Swatch would benefit from a refreshment of the board with members that are able to express an opinion openly.”

Swatch’s profit margin fell to just 2.1 percent in 2025. The company has a policy of maintaining jobs and production to be ready for an upturn, as well as about 7.3 billion francs ($9.4 billion) in inventory. It’s a costly exercise that has its critics.

“Swatch Group has a massive production overcapacity that can be solved only by selling some production units or closing them down,” said Oliver Müller, founder of industry advisor LuxeConsult. “As brutal as it may sound, you can try to swim against the tide, but at some point you will drown by exhaustion.”

CEO Hayek rejects the inventory criticism, saying it’s “long lasting, fantastic products or movements, it’s not an issue.”

The company has had recent successes, including the Tissot PRX and the Omega-Swatch “MoonSwatch” that became a global phenomenon.

But these are isolated cases and industry watchers say the group needs to do more to capitalize on the high-end segment, the strongest part of the market. Omega is the big earner: LuxeConsult and Morgan Stanley estimate that it accounted for about 75 percent of the group’s operating profit in 2024, a share that’s probably since grown.

One option for Swatch would be to streamline its portfolio, which is happening elsewhere. Richemont sold Baume & Mercier last month, and there’s been speculation that LVMH will offload Zenith.

Wood is set to propose himself as the bearer shareholders representative on Swatch’s board and introduce a package of reforms, including new board members and an independent chair for the compensation committee.

The activist faces many hurdles. He’s currently trying to confirm his 0.5 percent holding to the company after his latest submission was rejected by the Hayeks over documentation. Wood has since slightly increased his stake to get around the issue.

He’s also sent an explainer package to help investors tackle the complicated process Swatch has in place for bearer shareholders to be able to vote.

Investors need a letter from a custodian bank confirming their holding and blocking the stock from being traded. They then send this letter to the company — by post — to receive documentation on how to register.

“The fact that shares cannot be freely traded restricts many investors from exercising their voting rights,” said Andrea Bischoff, managing director at Sodali & Co., a consulting firm specialising in governance.

Wood is hoping his fact sheet will get more shareholders set up to vote in May, backing his proposals.

“The idea is just to break the concentration of power of two people and open it up,” he said. “I made my proposals so standard that I hope that the family could support some of them because if they’re against all of them, then they’re publicly declaring that they are against basic governance and Swiss standards.”

By Allegra Catelli, Deirdre Hipwell