Watches of Switzerland Group LON:WOSG, the UK-based retailer of high end luxury watches and jewellery published a trading update for the three months to end-July.
As we previously reported, Watches of Switzerland has consistently grown its revenue and it profits despite the health of the economy. CEO, Brian Duffy, knows his clientele well and has been consistent in his belief that high rollers will spend their way out of recession.
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Duffy said this morning: “We have delivered a [1Q23] performance in line with our guidance and expectations, with ongoing strong progress in the US, where we delivered 10% constant currency sales growth, and a performance in the UK and Europe that reflected the unwind of the product intake timing we benefited from in [4Q22].”
Watches of Switzerland sees robust demand
The group reported revenue of GBP382m, slightly down by 1% at a constant currency basis on the first quarter. Duffy said that the demand for luxury watches remained robust and continued to exceed supply, with consistent additions to client registration of interest lists. WOSG also reported that average selling prices for luxury watches continued to increase.
The luxury goods retailer said that revenue remained in line with guidance, though 1Q23 revenue was impacted by the: “unwinding of benefit of product intake in the UK in [the previous quarter] and strong prior year comparatives.” Revenue was buoyed by continuing strong performance in the US, where revenue was up 10% on a constant currency basis.
Despite the resilience of luxury consumers, WOSG saw luxury watch sales fall by 2% to GBP336m. Luxury watch sales – given the name of the company – make up a significant slice of WOSG’s revenue pie, making up 88% of the group’s revenue; up 1% on the previous quarter.
The UK and Europe took a big hit, with revenues down 8% to GBP219m. However, WOSG argued that in the UK performance continues to be driven by resilient domestic clientele and given the resumption of air travel following the Covid-19 lockdown saw brisk business in airline outlets as the country jets off on its summer break. The company also opened several new outlets, including a Mappin & Webb outlet in York and a Goldsmiths Luxury showroom in Bromley.
Jewellery loses its luster
Jewellery sales was also down, 15% when compared to this point last year, which WOSG explained by citing consumer sentiment and the fact that the company rerated its sales price in the US, removing discounts and selling its jewellery at full price in the US.
The company continues to roll out new showrooms, with a new retail presence – American Dream – in New Jersey opening in May as well as refurbishing and updating Mappin & Webb and Mayors outlets.
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The company expects that for the rest of the year, it will be business as usual, once the product intakes at the end of last year unwinds. Duffy said: “Looking ahead, we expect to return to more normalised growth rates in the balance of the financial year. Our full year guidance for another year of strong growth remains unchanged, underpinned by our supply visibility, client Registration of Interest lists and strong pipeline of showroom openings, refurbishment and investment, as luxury watch demand continues to outstrip supply. We look forward to presenting our Long-Range Plan update in the Autumn, which will outline our growth ambitions to FY28.”
The company is expecting group revenues of between GBP1.65bn to GBP1.7bn, showing growth of between 8% and 11%, with capital expenditure of GBP70m to GBP80m, Finance costs will be in the region of GBP23m to GBP27m, and expects to continue its refurbishment of its showrooms and bringing new outlets into existence.WOSG opened trading today (10th August) at 704p and was up to 721.75p soon after the trading update was issued, before settling back to 691p by 10:00. The FTSE250 company has offered a year-to-date return of -16.2% and a one-year return of -18.7% with shares ranging between 585.2p and 1,061p over a 52-week period, giving the company a market cap of GBP1.6bn
Bridgewise rates WOSG as a ‘Hold’. The analyst said: “Watches of Switzerland’s recently released results from Q1 indicate that Watches of Switzerland is performing reasonably well and on par with its peers. Its income and value factors appear positive and give support for optimism regarding the likelihood of continued positive performance. Therefore, Watches of Switzerland received an overall score of 70, translating into a ‘Hold’ ranking.”
