May 17, 2023
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Watches of Switzerland still outperforming, but sees headwinds

May 17, 2023

A Q4 and end-of-year update for Watches of Switzerland Group on Wednesday showed that the period to the end of April continued to be strong for the business and that it's entering its 2024 financial year "significantly ahead" of its long-range plan.

Watches of Switzerland

It seems that FY23 was another record year of revenue and profitability, with revenue growth of 25% at reported rates (+19% at constant currency) and continued EBIT margin expansion.

That said, the second half “saw a more challenging trading environment”, but demand stayed strong and “continues to exceed supply, with client registration lists continuing to grow”.

The luxury watches and jewellery retailer saw group revenue of £371 million, up 22% at reported rates, and up 18% at constant currency in Q4. 

US revenue of £173 million, was up 27% reported and 17% constant currency, while UK and Europe revenue of £198 million rose 18%, “benefiting from timing of deliveries of supply constrained product”.

It UK showroom development programme continued with several projects completed in the quarter. They include the continued rollout of the Goldsmiths luxury format with two showrooms expanded and refurbished in Cabot Circus, Bristol and Lakeside, West Thurrock; and two monobrand boutiques opened in partnership with Breitling in Leicester and Cribbs Causeway, Bristol.

It’s still expanding in Europe too, opening its sixth monobrand boutique, with TAG Heuer in Dublin. Early trading remains in line with expectations.

For the full year, group revenue of £1.543 billion was up 25% as mentioned. US revenue jumped 52% to £653 million, or up 35% at constant currency. And UK and Europe revenue rose 10% to £890 million.

Within all that, luxury watch revenue rose 28%, driven by increases in average selling price and volume, “demonstrating the continued dynamism of the category”. Luxury jewellery revenue rose 10%, group e-commerce revenue edged up 3% at reported rates, and pre-owned revenue grew in “strong double digits with pricing and margins maintained”.

For the year, adjusted pre-IFRS 16 EBIT is expected to be between £163 million and £167 million, better than the £130 million 12 months earlier, despite a number of headwinds. Adjusted EBIT post-IFRS 16 is expected to be between £177 million and £181 million, up from £144 million.

The company also announced that it has signed a letter of intent with Audemars Piguet (AP) to open an AP House in the UK in St Anne's, Manchester, via a joint venture partnership next spring.

It said this “is an important expansion in our partnership with Audemars Piguet which has spanned more than 50 years”. And it added that it will open a flagship Tudor monobrand boutique on Old Bond Street in Q4 of FY24.

Also looking to the future, its outlook statement said the first half of FY24 will see a more challenging trading environment than the second half of FY23, but conditions should improve in H2.

It expects “a modest sales decline in Q1 FY24 before normalising in Q2”.

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