Watches of Switzerland has reported another positive result as global demand for expensive timepieces sustained its red-hot streak, although shares tumbled as the group missed analyst forecasts.
Turnover at the retailer, which sells brands ranging from Cartier to Breitling and Omega, increased by 17 per cent – or 12 per cent on a constant currency basis – to £407million for the three months ending 29 January.
Sales of luxury watches jumped by 22 per cent to £340million, taking the firm’s total revenues from this segment over the first nine months of the fiscal year to £1billion.
Turnover: Watches of Switzerland, which sells brands such as Omega, saw its revenue increase by 17 per cent to £407million for the three months ending 29 January
Growth was primarily driven by the company’s operations in the US, where third-quarter revenues rose by over a third to £169million on account of multiple new showroom openings in the past two years.
The refurbishment and reopening of numerous outlets, including a multi-brand store in Canary Wharf and a Goldsmiths showroom at Brent Cross shopping centre, also helped boost trade in the UK and Europe.
However, Watches of Switzerland saw demand in Britain being impacted by a slow rebound in overseas tourist spending, despite the absence of cross-border travel restrictions.
In addition, orders of the group’s jewellery fell modestly, having skyrocketed by 88.4 per cent during the equivalent period last year.
As a result, total turnover came in £18million below the consensus expectations of £425million, leading Watches of Switzerland Group shares to dive by 11 per cent to £8.95 on Thursday.
This made them the biggest faller on the FTSE 250 Index, although they have still more than trebled since the Covid-19 pandemic started.
Russ Mould, investment director at AJ Bell, said: ‘The company may be taken aback at the scale of the negative reaction to what were otherwise reasonably robust third-quarter numbers accompanied by reiterated guidance.
‘It suggests a degree of scepticism over its claims to be relatively insulated from weaker consumer demand thanks to a wealthier clientele and the continuing strong demand for luxury watches.’
Having experienced a significant impact from lockdown restrictions in 2020, luxury brands saw sales recover vigorously as governments across the world loosened trading rules and passport holders could travel abroad more easily.
And even though retail spending is now being significantly impacted by rising inflation due partly to the war in Ukraine, wealthy shoppers – especially younger adults – are helping the luxury goods market to buck the current economic gloom.
For the current financial year, Watches of Switzerland estimates sales will increase to between £1.5billion and £1.55billion, while adjusted earnings before interest and tax are set to range from £163million to £175million.
A report published in November by management consultancy Bain & Company and Altagamma, the Italian luxury goods industry body, predicted the global luxury sector would expand every year for the rest of this decade.
This post first appeared on Dailymail.co.uk
