BIEL, Switzerland — Swatch Group fell the most in two and a half years after reporting full-year profit that missed analysts' estimates as demand weakened in China during the final months of the year and production bottlenecks cut into sales of Omega and Longines timepieces.

Operating profit rose to 1.15 billion francs ($1.16 billion), the Swiss company said Thursday. Analysts expected 1.29 billion francs.

Key Insights

The results will likely spark concern that the watch rebound is fading. Market turbulence in China has been disruptive, according to the company, which says it’s the biggest seller of timepieces to the region that’s so crucial for the watch industry. However, the company forecast healthy growth in 2019.

Bottlenecks stripped out a triple-digit million figure from sales, and unfinished Longines and Omega timepieces added to an inventory figure that reached 6.9 billion francs. Swatch pledged to resolve the production problems in the first half.

Tissot will finally launch its long-awaited smart T-Touch this year with its own operating system, a product that has faced several delays. Swatch’s lower-end brands face increased competition from the Apple Watch, and the company is finding it needs to expand more in e-commerce to lure more millennial shoppers.

While profit margins improved in 2018, investors’ focus is likely to be on the negative as a slowdown looms over the entire industry. While Swiss watch exports rose at their fastest pace in six years in 2018, growth has been slowing and December showed a drop.

Market Reaction

Swatch fell as much as 8.2 percent in early trading, the most since July 2016. The shares slumped 28 percent last year, their worst drop in a decade.

By Thomas Mulier and Corinne Gretler; editors: Eric Pfanner and Thomas Mulier.