Geneva  - The Swiss watch group Swatch reported Thursday net income of 838 million Swiss francs (723.6 million dollars) for 2008, a drop from the previous year's earning.

The company reported 5.96 billion francs in gross sales, a record, but its income was down from 2007's net income of over 1 billion.

"A noticeable drop in demand in the last months of 2008 mainly at wholesale level reduced the momentum in most brands and markets," the company said in its report, noting that even luxury items did not escape the downturn.

The company spent extensively on marketing in the second half of the year, during the Beijing Olympics.

The Biel, Switzerland based company said it was hoping for modest growth in the second half of this year but remained cautious about the markets. It would keep its dividends to shareholders at current levels.

With the global economic downturn there has been concern for Swiss exports, which are expected to drop this year.

The watch industry reported a very successful 2008 but warned that the downturn was already negatively impacting sales in the last months of the year, a trend likely to continue at least through part of 2009. (dpa)