Luxury goods retailer Watches of Switzerland (WOSG) ticked up 16.2% to 304.5p on Thursday after the company shrugged off the impact of the coronavirus pandemic to report record sales and profits for the year to 26 April 2020.
The UK’s largest retailer for Rolex, Cartier, OMEGA, TAG Heuer and Breitling watches said trading in the first quarter of its 2021 financial year has exceeded expectations in the UK and US, highlighting the resilience of the business.
Pre-COVID-19, Watches of Switzerland was trading strongly with positive momentum and the company reacted swiftly to the pandemic by reducing cash burn and cutting costs.
‘We delivered a strong performance during the first 46 weeks of the year before adapting with speed and agility to the challenges presented by the COVID-19 pandemic,’ explained chief executive Brian Duffy in today’s annual results statement.
For the year to 26 April, the Rolex-to-TAG Heuer purveyor grew sales 5.9% to £819.3 million. This was in spite of the COVID-19-related store closures on both sides of the pond which impacted the final 6 weeks of the year.
‘While we began full year 2021 with our global store portfolio closed due to the pandemic, we were well prepared for the re-opening of our stores during Q1 and trading has exceeded our expectations in both the UK and the US,’ enthused Duffy.
For the first quarter to 26 July, group sales fell 27.6% to £152 million, impacted by temporary store closures, but having re-opened outlets, stores saw a strong performance in July with sales up 7.4% year-on-year.
SHOWING ONLINE STRENGTH
Duffy attributed the better-than-expected UK performance to continued strong online sales and domestic demand in regional stores which partly offset greater declines in London due to reduced tourism and airport stores.
During the quarter, the US business continued to gain momentum with all re-opened stores performing strongly compared to the prior year.
Despite considerable macroeconomic uncertainties, the high end timepiece specialist was also able to give guidance for full year 2021, drawing confidence from a strong luxury watch market in the UK and US.
Watches of Switzerland now expects to generate revenues in the £840 million-to-£860 million range with flat year-on-year EBITDA and net debt of between £90 million-to-£110 million.
THE SHORE CAPITAL VIEW
Shore Capital sees the luxury goods market fundamentals ‘remaining favourable with demand for luxury watches continuing to exceed demand. This, in our view bodes well that despite a short-term decline in tourism and airport travellers, domestic customers will be able to pick up some of the reduced demand.’
Once more normal trading conditions return, the broker believes Watches of Switzerland’s management can ‘continue to leverage its market leading position and implement its strategy of format enhancement. We wonder whether the current market conditions may accelerate a fallout of the competitor set and enable the company to take advantage of both its market leading position and balance sheet strength to further consolidate the market with potential bolt-on acquisitions.’