Watches of Switzerland Group PLC (LSE:WOSG) has yet to recover from a bruising 25% share price decline in January, and investors shouldn’t hold their breath waiting for a miracle in the Rolex merchant’s upcoming interim results.
At least, that’s what the latest Swiss watch export trends show us.
Year-on-year Swiss watch exports were down 2.8% in October, according to UBS. While this is a substantial improvement from September’s 13% decline, it still shows a sector suffering negative sales growth.
Japan and the US were up 20% and 11% respectively in October, but this was far from enough to offset a 39% decline in China.
Plummeting Chinese demand has impacted all corners of the global luxury industry, but high-end watches have been particularly out of favour.
Luxury watch prices on the secondary market flopped to a two-year low in October and have only marginally improved since, per the Bloomberg x Subdial Index.
The very high end of the watch market (i.e. £2,500 and above) was the only segment to post growth in October, while the mid range posted double-digit declines.
Although improving US sales “could provide some green shoots” for the sector, “we note the underlying industry momentum remains volatile, with continued risks skewed to the downside”, said UBS analysts in their research note.
It sets the stage for a nervous first-half earnings call for WoSG’s management, which is also facing pressure from activist investor Gatemore to move its primary listing from the London Stock Exchange to New York.
WoSG currently has full-year revenue guidance of between £1.67 billion and £1.73 billion, reflecting constant currency sales growth of 9%-12%.
Hopefully, investors won’t be stung with another profit warning when results are published on Thursday, 5 December.