Swatch Group today said its first-half profit would slide 50-60% on dwindling sales in Hong Kong and Europe.
Analysts also warned that the deadly Bastille Day attack in Nice last night would hurt tourist sales for the foreseeable future.
Swiss watchmakers are grappling with weak demand as fewer Chinese tourists shop for timepieces in Hong Kong and Europe and a strong Swiss franc pushes up the production cost for "Swiss made" watches.
The world's biggest watchmaker said it expected sales to fall about 12% in the first half due to "important markets like Hong Kong and partially Europe, especially France and Switzerland, while mainland China develops positively".
The group said it would keep its staff and also maintain investments in new products and marketing.
It added that it would pursue a defensive price increase policy even though this meant an important hit to its margins.
"The operating profit and the net income are expected to be lower by some 50-60%," the maker of Omega, Longines and Swatch watches said, adding it would publish full first-half results on July 21.
Swatch Group is facing even more headwinds than rivals because, unlike Richemont, it has little exposure to the flourishing jewellery category and its entry-price brands face fierce competition from smartwatches like the Apple watch.
Reuters reported last month that Swatch was backpaddling on the phasing-out of watch movement deliveries, in a sign demand for watches is likely to stay subdued in the foreseeable future.
Swiss watch exports, of which Swatch's products make up an important part, fell 9.5% in the first five months of the year, dragged down by their two biggest markets, Hong Kong and the US.