After experiencing an unusually difficult Q1, Watches of Switzerland (WoS) said it is back on track in Q2 and it announced a major ‘Long Range Plan’ to more than double sales and profits between the financial years 2024 and the financial year 2028.
That may be a tall order for many, but not WoS. The high-performing luxury watch and jewelery retailer sees “several significant organic and inorganic growth opportunities across [the] UK, US and Europe” to support its rosy outlook.
Tuesday’s comes after WoS suffered a rare drop in Q1 revenue when it announced in August that supply problems could not meet demand in its core UK and European operations. It was also up against tough comparisons a year ago.
Fast forward to today, and CEO Brian Duffy said the plan “represents our strategy over the next five years to capitalize on our leading market positions and the unique growth opportunities available to us as the world’s largest retailer of luxury watches.”
He added: “The Group is stronger than it has ever been and we are well ahead of the original plan we outlined in 2021, with a diverse pipeline of projects already planned for FY24, FY25 and FY26 which include our strongest pipeline ever of committed Rolex projects.”
The big ambition is to surpass a milestone of £3 billion in revenue while “driving operational leverage and accelerating new showroom projects and M&A activity”.
Underpinning this is the “exciting” opportunity in the second-hand market, which it expects to deliver strong percentage growth in both the US and UK.
It also sees “significant growth potential” in the luxury branded jewelery market and is now “perfectly positioned to apply our market-leading luxury watch model and expertise in elevating luxury brands to this growing category”.
These announcements come on the back of an improved trading performance in Q2/H1 (in the 13 and 26 weeks to 29 October), “achieved in the difficult consumer environment”, it noted.
UK sales admittedly struggled in the first half of the year, but were supported by strength in the US market, although group adjusted EBIT for the period fell.
Highlights included the strong momentum in the US with sales up 11% at constant currency and a positive early response to its Rolex Certified Pre-Owned program. which launched in the UK in September, following the US launch in July.
But the UK “left the quarter strong and returned to year-on-year growth in October”. This was delivered despite the impact of several high-turnover Jewelers and Mappin & Webb showrooms being closed for upgrades and trading from pop-up locations during the quarter. These will reopen before Christmas, it is noted.
And another business bonus is its deal in October to acquire 19 luxury watch showrooms, including five monobrand stores from Ernest Jones in the UK.
In Q2, the group’s revenue rose 5% in constant currency (+1% reported) to £379m. It said demand for luxury watches “remains robust and continues to outstrip supply” while average selling prices continue to rise.
No wonder WoS sees these “exciting opportunities” in its pre-owned business, with sales growth of 88% in constant currency (+80% reported) over the previous year.
In the US, revenue rose 11% at constant current (+4% reported) to £165m.
UK and Europe revenue of £214m was in line with previous years with results “continuing to be driven by domestic customers across the UK”.
For the first half of the year, the group’s revenue was up 2% (reported sales flat) at £761 million. Luxury watch sales were up 3% (constant) and flat (reported) to £670m, representing 88% of revenue.
Luxury jewelery fell 15% at constant currency and fell 17% at reported rates to £47m, “reflecting market trends influenced by general consumer sentiment and by a repositioning to full price sales in the US”, it explained.
UK and Europe performance was driven by domestic customers and saw a 4% decline to £433m. By contrast, strong momentum continued on the American market with revenue up 11% (reported +5%) to £328m.
Group e-commerce sales were down 4% year-on-year at reported rates against strong comparisons in the prior year and impacted by the higher proportion of jewelery sales through this channel.
H1 FY24 Adjusted EBIT is expected to be in the range of £70million-£72 million, down from £87 million a year ago.
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