Watches of Switzerland Group LON:WOSG, the UK-based retailer of high end luxury watches published a trading update for its third quarter of 2022/23 and the nine months to 29th January 2023 today (9th February).
The company has had a strong year so far, despite the general recessionary climate, as its high-end clientele seemed to be immune from the economic downturn. The luxury goods sector has been a highlight over the last year, and as we reported recently WOSG’s French peer, LVMH [EPA:MC] has also had a strong year’s trading, with its revenues and profits up 23% over the year.
Positive update
There was expectation from the market that today’s end of term report would be positive, given WOSG’s confident update in December 2022. The company duly reiterated its guidance with predicted revenues for FY being GBP1.5bn to GBP1.55bn and adjusted EBITDA of GBP163m to GBP175m. The guidance was prepared using A GBP1:1.25USD exchange rate.
As for 3Q22/23 the company announced group revenue of GBP407m, up 17% (at reported currency rates) from GBP348m in 3Q21/22. Over the nine months the retailer saw group revenues of GBP1.17bn, a 25% jump on the corresponding period a year before where revenues hit GBP934m.
Supply constraints
WOSG’s performance, it said, was driven by its luxury watch portfolio, where (just like gas and energy bills), demand outstripped supply and the retailer reported a 22% increase in revenues, up to GBP340m, which contributed 84% of revenue which was positively affected because the group could charge more for its products due to a lack of supply on the market.
Watches of Switzerland doesn’t just sell watches from Switzerland, but also sells luxury jewellery. This segment of the business grew more slowly, only 2% to GBP41m, and did not benefit from constrained supply in the same way that luxury watches did during the period.
- Wizz Air lifts profits as capacity grows
- Domino’s Pizza delivers solid Q3 despite weaker demand
- Empiric Student Property reports drop in occupancy levels
Although WOSG has a significant bricks and mortar retail presence – something the company has aggressively expanded in 2022 and plans to continue this year with a new 7,000sq.ft. Rolex showroom opening in London’s Bond Street and a Cartier- and Omega-anchored showroom at One Vanderbilt in Manhattan – the company also reported e-commerce revenue up 5% year-on-year.
America Forward
Revenue from UK and Europe still led the way in terms of region with a GBP238m contribution, up 7% from 3Q21/22, but by way of justification of its aggressive expansion strategy into North America, WOSG reported GBP169m in revenue contribution from the region; a 36% improvement from the corresponding quarter in 2021.
Brian Duffy, WOSG’s chief executive said in a statement this morning: “Demand remains strong and continues to exceed supply, with client registration lists growing. We exited the quarter with good momentum and are pleased to reiterate our full year guidance […] looking ahead, we remain confident that our strategy will further enhance our leadership position as we continue to deliver on our Long-Range Plan objectives.”
WOSG opened business today at 929.9p but fell to 858.9p within the first hour of trading. The FTSE250 company has offered a year-to-date return of 10.4%, and -26.2% over one-year with shares ranging between 632.5p and 1,397p over a 52-week period, giving the company a market cap of GBP2.4bn
Deshe Analytics rated WOSG as a ‘Hold’, stating: “Looking at Watches of Switzerland Group financials of 2Q22 reflected unimpressive, mediocre results. Its growth, value, and income factors all individually appear positive and give support for optimism regarding the likelihood of continued positive performance. Therefore, they earned a total score of 63 out of 100.”
