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.

Continued US strength and the lack of exposure to the more volatile Chinese market and conflict in the Middle East means Watches of Switzerland expects another revenue boost of as much as 10% in the current fiscal year.

The company expects a resurgence in the UK to further help its performance this year, Chief Executive Officer Brian Duffy said at an investor event Tuesday where he also confirmed it had scrapped its detailed long-term guidance.

From now on, Watches of Switzerland will only provide specific targets for each fiscal year, avoiding big picture forecasts like the one made in 2023 when the company pledged to hit £3 billion in annual revenue by the end of 2028 — a target that is no longer achievable in that time frame.

Watches of Switzerland will, instead, provide investors with “building blocks to facilitate your own projections for future years,” Duffy said, confirming an earlier report from Bloomberg last month.

The shares, which have more than doubled over the past year, closed unchanged on Tuesday. The stock had 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. Duffy declined to comment on the speculation.

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 faced 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.

Duffy said the retailer’s growth in the coming years would continue to be driven by its showrooms, e-commerce business, expansion in the US and growing jewelry sales. The retailer’s push into the fast-growing certified pre-owned watch market also continues and it intends to separately report sales from that unit in the future as it has become a significant part of the business, he added.

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,” said Investec retail analyst Kate Calvert.

(Updates with comments from conference call on mid-term targets.)

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