The Swatch Group, the world’s largest watchmaker, posted a 6.6% drop in total sales to 1.8 billion Swiss francs (US$1.28 billion) for the half year ending June 30. Net income for the Swiss watch conglomerate, based in Bienne, Switzerland, fell 9.7% to CHF186 million (US$131 million), says a half-year report released Aug. 21. However, it expects a “positive second semester,” citing higher sales in July and August and more visitors and sales at its own stores around the world. There is a “normalization and even improvement in business observed in many markets, together with the slow recovery of travel and tourism,” it said in August.

Watch production, which provides 70% of the company’s revenues, fell 8.2% to almost CHF1.3 billion (US$892 million). Sales of watch movements and components alone (the group also makes electronic systems) declined 1.1% to CHF850 million (US$457 million).

The group blamed the drop on “difficult conditions and … unforeseeable factors,” including the strong Swiss franc and the respiratory illness SARS, which contributed to the decline in travel and worldwide tourism and sluggish consumer spending.

Nevertheless, the group didn’t cut back in either marketing or research and development and made almost no local price increases.

The report cited growth in the prestige and luxury watch market, with Breguet reporting “impressively strong gains.” Omega, Blancpain, and Glashütte also posted favorable half-year results. In the basic market segment, however, the popularly priced Swatch brand was hit in late spring by “a drop in tourism and negative monetary influences.”