Watches of Switzerland Group shares jumped on Tuesday after the firm unveiled proposals to more than double sales and profits in the coming five years.
Shares in the luxury retailer, which sells iconic timepiece brands like Rolex, Breitling and Tag Heuer, climbed 13 per cent to 586.5p just before markets closed, making it the top riser on the FTSE 100 Index.
Under its ‘long range plan,’ the company aims to surpass £3billion in turnover by enhancing its store estate and selling more branded jewellery and used watches.
Luxury: Watches of Switzerland Group sells iconic timepiece brands like Rolex
Britain and the US are at the focus of this strategy, with the firm targeting an average annual revenue growth rate of 8 to 10 per cent in the former market and up to 25 per cent in the latter territory.
To achieve this, the London-based business intends to invest between £350million and £500million, including on new store projects and further targeted acquisitions.
Despite the global economic slowdown, the luxury goods industry is predicted to continue getting bigger, spearheaded by regions like Asia and the Middle East.
Management consultancy Bain & Company estimates the market will be valued at up to €570billion by 2030, double its worth at the start of this decade.
Brian Duffy, Watches of Switzerland’s chief executive, said the group’s plan would ‘capitalise on our leading market positions and the unique growth opportunities available to us as the world’s largest luxury watch retailer.’
Watches of Switzerland published the strategy alongside a trading update showing its turnover recovered modestly in the second quarter.
In the 13 weeks ending 29 October, the firm’s total revenue increased by 5 per cent on a constant currency basis to £379million thanks to pre-owned orders jumping by 88 per cent.
Trading was further boosted by higher average selling prices and solid demand for luxury watches in the US, where the group opened seven outlets, including three each in Utah and New Orleans.
This offset flatlining revenue across the UK and Europe, where the company has recently temporarily closed some ‘high turnover’ Goldsmiths and Mappin & Webb showrooms for refurbishment.
However, due to a weak performance in the first quarter, half-year revenue dipped to £761million as jewellery demand was impacted by weak consumer sentiment and a shift to full-price sales in the US.
Brian Duffy has previously blamed the decline in jewellery purchases on the Covid-19 pandemic causing fewer people to get engaged and married.
Yet the company has upheld its full-year guidance, with turnover expected to rise to between £1.65billion and £1.7billion and adjusted core earnings margin forecast to be in line with the prior financial year.
Russ Mould, investment director at AJ Bell, said: ‘The business is certainly ambitious and having a clear plan about how it will grow should help to soothe investors worried that it was getting left behind.
‘That said, having a plan is one thing; successfully executing on it is another. The company has now set a new benchmark, and failure to hit expectations will not go down well.’
