Watches of Switzerland Group PLC (LSE:WOSG) confirmed that profit profits fell 40% last year but the UK market is stabilising and growth in the US means it will soon represent half of group sales.
The luxury watch and jewellery retailer reiterated its “cautiously optimistic” guidance for the new year, saying the industry as a whole is on a more conservative footing, slowing production amid a slowdown in the wider luxury market, while prices rose sharply.
Statutory profit before tax fell 40% to £92 million while underlying profit on an adjusted EBIT basis came in at £135 million for the 52 weeks ended 28 April 2024, down 18% year-on-year, but within the £133-136 million recent guidance from last month.
Likewise, revenues were flat at £1.54 billion, with US sales up 11% on a constant currency basis to £692 million and the UK & Europe down 5% to £846 million. Watch sales, representing 87% of the group, were up 3%, while jewellery fell 13%.
Boosting both regions has been the launch last year of its Rolex-certified pre-owned offering, adding to its pre-owned and vintage revenues, which doubled last year.
Cash flow declined 19% to £118 million and the company continued to hold fire on shareholder returns, saying its main priority is to invest in more showrooms given the attractive returns, as well as strategic acquisitions, such as the purchase of jewellery brand Roberto Coin last month.
CEO Brian Duffy said the UK market is “starting to show signs of stabilisation” after the fall in UK & Europe sales last year against a background of significant price increases at a time of reduced consumer confidence but “we see these pressures easing in FY25”.
Positive factors for the group in the coming year include a programme of showroom developments on both sides of the Atlantic and what Duffy said is “our strongest ever pipeline of committed projects”, which includes the flagship Rolex boutique on Old Bond Street, London, Audemars Piguet Townhouse in Manchester, Rolex boutique in Atlanta, Georgia and a Rolex anchored multi-brand in Plano, Texas.
Pre-owned represents a “significant opportunity” for the group, he added, with pre-owned luxury watch sales doubling year-on-year in the fourth quarter and the new Rolex-certified pre-owned programme performing ahead of expectations in both the US and UK, with a further roll-out set for FY25.
For the year to April 2025, guidance is for revenues to grow 9-12% to £1.67-1.73 billion, with adjusted EBIT margin improving 0.2-06 percentage points.