Watches of Switzerland reports record annual performance – but shares fall amid worsening business backdrop
- The luxury retailer declared revenue of £1.54bn for the 12 months ending April
- Turnover almost doubled from what the group achieved four years ago
- Swiss shares were the biggest losers on the FTSE 350 on Wednesday
Result: Swiss Watches announced record revenue and profits last year
The watches Switzerland group has appreciated another record annual result, but its shares have slumped following warnings of tougher trading conditions.
The luxury retailer announced revenue of £1.54bn for the 12 months ending April, a quarter of the previous year and almost double the amount it achieved four years earlier.
The growth was driven by more than half of its sales in the United States, where the firm has expanded heavily in recent years by acquiring and opening stores.
By comparison, its sales in the UK and Europe grew by only 10 per cent to £890 million, despite launching and renovating a number of stores, including five at Battersea Power Station alone.
Business 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’.
As a result, it expects to report annual underlying pre-tax earnings of between £163 million and £167 million, compared with £130 million in the prior year.
Yet the performance failed to prevent shares in the Watches of Switzerland group falling 6.3 per cent to 694p on Wednesday, the worst performer of the FTSE 350 index.
The company warned that the ‘more challenging business environment’ experienced in the second half of the last fiscal year continued into the new year.
It expects a ‘modest sales decline’ in the first quarter due to a strong comparative trading period before normalizing over the next three months.
After two years of unprecedented expansion, the firm forecasts only 8 to 11 percent growth in total revenue this year on a constant currency basis.
Chief executive Brian Duffy said: ‘Although, as expected, the second half of FY23 saw a more challenging business environment, demand remains strong and continues to exceed supply, with customer registration lists continuing to grow.’
He added: ‘We are confident in our goals of maintaining our leadership position in the UK, becoming the clear leader in the US and capitalizing on our growth potential in Europe.’
Watches of Switzerland announced plans to open two more stores in 2024, one in Manchester under a joint venture with Audemars Piguet and another selling Tudor watches on Old Bond Street, one of London’s most upscale shopping destinations.
It comes this month with plans to launch multi-brand showrooms in New Jersey, the Netherlands and New York City next January.
Ross Mould, investment director at AJ Bell, said: ‘There is nothing in the latest update to suggest major problems at Watches of Switzerland.
But, he added: ‘The trouble is that investors have seen other pandemic retail winners fall flat on their faces over the past few years, and they may worry that the latest update from Switzerland’s watches could be the first in a series of failures.
‘The pressure is on for business not to put up with online fashion retailers as well as on Scrapbook, which suffered a post-pandemic hangover.’
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Source: www.dailymail.co.uk
