Watches of Switzerland reports a record annual performance, but shares plummet in a deteriorating trading environment
- The luxury retailer reported revenue of £1.54 billion for the 12 months ended April
- Turnover was about double the amount the group achieved four years ago
- Watches of Switzerland shares were the biggest faller on the FTSE 350 on Wednesday
Result: Watches of Switzerland posted record sales and profits last year
Watches of Switzerland Group posted another record annual result, but saw its shares fall after warnings of difficult trading conditions.
The luxury retailer reported a turnover of £1.54 billion for the 12 months ending April, a quarter more than the previous year and about double the amount it achieved four years ago.
The growth was driven by a sales increase of more than half in the United States, where the company has grown strongly in recent years by acquiring and opening stores.
By comparison, sales in the UK and Europe were up just 10 per cent to £890 million, despite the launch of multiple new stores, including five in Battersea Power Station alone.
Trade was also boosted by watches being sold in greater numbers and at higher average prices, reflecting the “continued dynamics of the category,” the company said.
As a result, it expects to report annual underlying profit before tax between £163m and £167m, compared to £130m in the previous year.
However, it failed to prevent this achievement Watches from the shares of the Swiss group by Wednesday morning to become the worst performer of the FTSE 350 Index. They recovered modestly to end the day down 5.8 percent at 697.5 pence.
The company warned that the “more challenging trading environment” in the second half of the past fiscal year had continued into the new year.
It expects a “modest decline in sales” in the first quarter due to a robust comparative trading period in the previous year, before normalizing in the following three months.
After two years of unprecedented expansion, the company forecasts that total sales will grow only 8 to 11 percent this year at constant exchange rates.
Chief executive Brian Duffy commented, “While, as expected, the second half of FY23 saw a more challenging trading environment, demand remains strong and continues to outpace supply, with customer registration lists continuing to grow.”
He added: “We remain confident in our objectives to maintain our leading position in the UK, become the clear leader in the US and capitalize on our growth potential in Europe.”
Watches of Switzerland has announced plans to open two more stores in 2024, one in Manchester under a joint venture with Audemars Piguet and the other selling Tudor watches on Old Bond Street, one of London’s most exclusive shopping destinations.
This comes along with plans to launch multi-brand showrooms this month in New Jersey, the Netherlands and New York City in January.
Russ Mould, director of investment at AJ Bell, said: “There is nothing in the latest update to indicate any major problems within Watches of Switzerland.”
But he added: “The problem is that investors have seen other pandemic retail winners fall flat on their faces in recent years, and they might worry that Watches of Switzerland’s latest update could be the first in a series of setbacks.” .
“The company is under pressure to deliver and not be scrapped along with the online fashion retailers who have suffered an almighty hangover from the pandemic.”