LONDON — Watches of Switzerland Group Sets Ambitious Targets After a Strong Quarter
Strong Sales Boost Targets
In a notable move following a robust quarter of holiday trading, particularly in the U.S., Watches of Switzerland Group (WoS) has elevated its sales and profit expectations for the full fiscal year. The luxury watch and jewelry retailer, which boasts various prestigious brands in its portfolio, including Rolex, and owns chains like Mappin & Webb and Betteridge, enjoyed a trading period that exceeded initial projections.
Consistency in Demand
During the fiscal third quarter, which concluded on January 25, WoS reported sales patterns that were on par with the trends established in the first half of the fiscal year. The group’s growth comfortably surpassed expectations, underscoring a sustained demand for key luxury brands that continues to outstrip supply in both the U.K. and U.S. markets.
Revised Sales Growth Forecast
As a direct response to this strong performance, WoS is now forecasting sales growth in constant currency between 9% and 11%. This is a significant increase from the earlier estimate of 6% to 10%. Furthermore, the EBIT (earnings before interest and taxes) margin percentage is slated to improve in the second half compared to the first, reflecting strategic investments aimed at fostering long-term growth and profitability.
Resilience Amid Challenges
Brian Duffy, the Chief Executive Officer, emphasized the achievements of the third quarter, noting they came despite an unpredictable operating environment characterized by macroeconomic uncertainties and tariffs. He praised the collective effort of the team at WoS, asserting that their hard work has been pivotal to the company’s impressive performance.
Broad-Based Growth in the U.S.
The U.S. market exhibited steady growth across various categories, brands, and price points, reflecting strong client demand and the effectiveness of WoS’s operating model. The company credited marketing initiatives, particularly the impactful Roberto Coin campaign, along with an emphasis on product ranging and merchandising, for driving significant sales in North America.
Acquisition of Deutsch & Deutsch
In January, WoS made a strategic acquisition by purchasing Deutsch & Deutsch, which operates four Rolex-anchored showrooms in Texas. This move reinforces the group’s foothold in a vital U.S. market and complements its existing brand portfolio.
Stable Performance in the U.K.
In the United Kingdom, trading conditions for luxury watches and jewelry mirrored recent trends. Notably, the Rolex boutique on Old Bond Street showed remarkable momentum, providing clients with an exceptional shopping experience. WoS is actively sharing insights from this high-performing showroom across the company to elevate its luxury retail proposition.
Success in the Pre-Owned Market
The certified pre-owned watch business in both the U.S. and U.K. is thriving, with investments in e-commerce proving fruitful. WoS plans to maintain stable capital expenditures projected at £65 million to £70 million through 2026, signaling confidence in future growth prospects.
Market Reactions and Profit Margin Concerns
Despite the optimistic growth outlook, WoS’s share price saw a decline of 3.8%, closing at £4.95. Analysts noted concerns regarding high gold and silver prices, coupled with one-off charges related to Saks Global’s collapse, which are expected to affect profit margins in the current fiscal year.
Broader Industry Trends
Analysts at Jefferies have observed that the growth at WoS appears to be largely driven by the U.S. market, a trend that aligns with the recent performance of luxury brands like Swatch and Richemont. The latter reported an unexpected 7% rise in fiscal third-quarter sales in their specialist watch category, indicating a positive trend across regions including the Americas.
Global Sales Recovery
The trend of recovery in luxury watch sales is anticipated to hinge on the U.S. and China markets. Recent reports have shown that Swiss watch exports have started to rebound, with a 3% increase recorded in December, primarily fueled by stronger demand in the U.S. and France.
Cultural Shifts in Luxury Consumption
As the luxury watch market evolves, it is crucial to note that younger consumers, especially Gen Z, are emerging as key players in driving the secondary market. Their interest in heritage styles, unique designs, and classic brand icons suggests a vibrant future for luxury watch sales, blending tradition with contemporary consumer preferences.
By maintaining a strategic focus on market positioning and leveraging established brand partnerships, Watches of Switzerland Group aims to navigate future challenges while enhancing their growth trajectory in both the U.S. and U.K. markets.