UK’s Top Rolex Retailer Upbeat on Outlook for Profit Growth
(Bloomberg) — Watches of Switzerland Group Plc’s annual revenue jumped by 13%, underpinned by strong US demand that the luxury watch retailer said is laying the foundation for long-term profit growth.
Group revenue of £1.83 billion ($2.4 billion) was driven mostly by US sales, which were up nearly a quarter during the year through early May, Britain’s top seller of Rolex watches said Tuesday, matching expectations.
Since entering the US around 2017, Watches of Switzerland has quickly gained ground, opening new showrooms and improving digital sales. The London-listed retailer, which now makes more than half of its revenue in America, has said expanding personal wealth there is likely to push further gains in market share.
The continued strength of the US business, and its lack of exposure to the Chinese market and the conflict in the Middle East, means it expects another revenue boost of as much as 10% in the current fiscal year. Chief Executive Officer Brian Duffy also flagged encouraging signs that the UK market is improving.
The shares, which have more than doubled over the past year, rose as much as 2.3% before paring the gain. They jumped by more than 4% on Monday after a report said Watches of Switzerland held talks in recent months over offers to take it private. The company won’t comment on “speculation” in the media, Duffy said Tuesday on a call with reporters.
The luxury retailer will report the fast-growing certified pre-owned watch market as a standalone segment in the future as it has become a significant part of the business, he added. He singled out Longines as a brand that is performing particularly well in online sales.
Investors are still waiting for additional details on Watches of Switzerland’s longer-term growth outlook. It has dropped a five-year goal of hitting £3 billion in annual revenue by the end of 2028, as reported by Bloomberg last month, and will provide an update on a call with analysts later on Tuesday.
The focus today will be on the “broader more detailed medium-term strategy update this afternoon,” according to Kate Calvert, retail analyst at Investec.
The company “continues to see an attractive pipeline of showroom investment opportunities and remains well positioned to capitalize on acquisition opportunities that would accelerate its strategic priorities,” Calvert added.
Although Watches of Switzerland has weathered the broader slowdown in the luxury sector relatively well, its bullish five-year target was set during a time when the outlook appeared very different.
Major watch and jewelry brands have had to contend with record gold prices inflating input costs, currency volatility, escalating US trade tariffs and fallout from the conflicts in the Middle East and Ukraine.
After a post-pandemic surge, a collapse in Chinese consumer demand, which had powered everything from Swiss watch exports to Paris fashion houses, has also hit the sector hard.
Growth drivers laid out in its previous plan are likely to stay the same but Watches of Switzerland is not expected to give specific forecasts with prescriptive time frames.
While Watches of Switzerland is one of the few ways to gain indirect exposure to Rolex, its reliance on the US means it’s exposed to tariff risk but doesn’t stand to benefit from any recovery in China, according to Piral Dadhania, an analyst at RBC.
(Updates with comments from CEO call starting in fourth paragraph.)
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