Watches of Switzerland reports record annual performance – but shares slide

Result: Watches of Switzerland declared record revenues and profits last year

Watches of Switzerland Group has hailed another record annual result but seen its shares slide after warning of difficult trading conditions. 

The luxury retailer declared revenue of £1.54billion for the 12 months ending April, jumping by a quarter on the previous year and about double the amount it achieved four years ago.

Growth was driven by sales soaring by more than half in the United States, where the firm has expanded heavily in recent years by acquiring and opening stores.

By comparison, its sales across the UK and Europe increased by only 10 per cent to £890million despite launching multiple new shops, including five in Battersea Power Station alone. 

Trading was also boosted by watches being sold in greater numbers and at higher average prices, which the business said reflected the ‘continued dynamism of the category.’

Consequently, it expects to report annual underlying pre-tax earnings of between £163million and £167million, compared to £130million in the prior year.

Yet this performance failed to prevent Watches of Switzerland Group shares from becoming the FTSE 350 Index’s worst performer on Wednesday morning. They recovered modestly to end the day 5.8 per cent down at 697.5p.

The company warned that the ‘more challenging trading environment’ experienced in the second half of the last financial year had carried on into the new year.

It anticipates a ‘modest sales decline’ in the first quarter due to a robust comparative trading period the prior year before normalising in the following three months.

Following two years of unprecedented expansion, the firm forecasts total revenue rising by just 8 to 11 per cent on a constant currency basis this year.

Chief executive Brian Duffy remarked: ‘Although, as expected, the second half of FY23 saw a more challenging trading environment, demand remains strong and continues to exceed supply, with client registration lists continuing to grow.’

He added: ‘We remain confident in our goals to maintain our leadership position in the UK, become the clear leader in the US, and capitalise on our growth potential in Europe.’

Watches of Switzerland announced plans to open another two 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 upmarket shopping destinations. 

This comes alongside plans to launch multi-brand showrooms in New Jersey this month, the Netherlands, and New York City next January.

Russ Mould, investment director at AJ Bell, said: ‘There is nothing in the latest update to suggest major problems within Watches of Switzerland.’

But, he added: ‘The trouble is that investors have seen other pandemic retail winners fall flat on their face over the past few years, and they might worry that Watches of Switzerland’s latest update could be the first in a series of setbacks.

‘The pressure is on for the business to deliver and not be put on the scrapheap along with the online fashion retailers who suffered an almighty post-pandemic hangover.’