Watches of Switzerland Group PLC (LSE:WOSG), Britain’s most prominent Rolex merchant with over 150 showrooms across the UK, has set the clock for its third-quarter trading update amid turmoil in the secondary luxury timepiece market,
Much has been said about the tumbling price of luxury timepieces on the pre-owned market after two years of exceptional growth following the pandemic-era bonanza for luxury items.
WatchCharts’ Overall Market Index, an indicator of financial trends in the secondhand luxury watch market, is down around 11% in the past six months, while the Subdial50, an index made up of the top 50 most-traded models on the pre-owned market accounting for over 20% of total spend globally, is down over 30% year on year.
WatchCharts’ Overall Market Index – Source: watchcharts.com
Tumbling prices of the secondhand market have forced Chrono24, the largest online marketplace for luxury watches, to cut its headcount by around 13%.
But as an official primary-market merchant, Watches of Switzerland is less prone to falling prices on the secondary market.
On the contrary, Rolex raised its primary prices twice in 2022 – by 3.5% in January and another 5% in the UK and Europe in November – whereas the maker typically only hikes prices once a year.
Demand continues to outstrip supply, with waiting times stretching to half a decade in some instances.
Put simply, primary-market Rolex sales are strong, regardless of the global economic downturn.
“We see Watches of Switzerland as one of the main beneficiaries, as most of the retailer’s revenues come from Rolex,” stated Eleonora Dani, research analyst at Shore Capital.
“Jewellery does much better than the rest of retail during tough times,” Dani noted. “In December, US Jewellery company Signet reported an upbeat third-quarter trading update (top line up 2.9% Year on year) and outlook, citing strength in website visits ahead of the holidays.”
As for Watches of Switzerland, Dani noted earnings multiple of nine times the estimated earnings for full-year 2023, which is 12% higher than at the start of the year but still 30% lower than the previous year.
Watches of Switzerland upped its guidance in November to full-year revenues between £1.5bn and £1.55bn, an increase from a previously estimated range of £1.45bn and£1.5bn.