Watches of Switzerland bounces back in Q4 after tough nine months

Luxury watches and jewellery retailer Watches of Switzerland Group delivered a pleasing update on Thursday saying that Q4 of FY24 helped it “finish the year strongly”.

Its full year (the 52 weeks to late April) performance was “in line with guidance” and its FY25 outlook “reflects cautious optimism”.

The company repeated that it’s confident of delivering its long range financial targets.

The formerly-high-flying company had seen its shares plunging back in January as it delivered a weak Q3/Christmas update. And the shares had fallen 40% over the previous six months following other negative news last year.

But looking at the final quarter of its financial year, the firm appears to be starting a comeback.

Q4 recovery

Q4 group revenue rose 4% to £380 million at constant currency (CC) and 3% at reported rates. The quarter’s luxury watches revenue rose 5% CC and 3% reported, “with particularly strong performance in the US”.

Demand for its key brands “continues to be strong, with consistent additions and conversions”.

And it made continued market share gains in the luxury watch market in both the UK and US “as a result of our differentiated offering”.

Rolex Certified Pre-Owned (Rolex CPO) performed ahead of expectations, with a further rollout of doors planned in FY25 as supply conditions in the UK improve. And its total pre-owned and vintage revenue doubled in Q4 year on year.

Following the recent acquisition of Roberto Coin in the US, it’s clear that jewellery is also a key part of the business and WOSG said the quarter saw a significant improvement in jewellery performance.

While sales were flat CC and down 1% reported, they’d been down 16% CC and 18% reported in Q3. And this time it saw a “significant outperformance by luxury branded jewellery”.

Regionally, the firm’s Q4 US performance was strong with revenue up 14% CC and 10% to £190 million.

That looks set to improve as the firm’s showroom development programme continues. Watches of Switzerland One Vanderbilt, New York opened in March 2024 and it secured a new Rolex monobrand boutique in Lenox, Atlanta; opening in FY25, replacing the existing Mayors multibrand. Plus that Roberto Coin buy should also provide a boost to its American ops.

UK weakness

The UK & Europe was weaker in Q4 with a 4% revenue drop, although this was better than Q3 when revenue fell 7%. It was helped this time by an improvement in jewellery sales.

It continued to “gain market share in the luxury watch market due to our differentiated offering despite the challenging macroeconomic conditions”. And it said the†UK performance continues to be driven by domestic clientele “with minimal return of tourist spending due to the lack of VAT free shopping”.

While its e-commerce revenue fell 20% in the quarter, it has plenty of initiatives that should drive UK & Europe sales higher.

Rebranding, colleague training and system conversions have been completed for the showrooms acquired from Ernest Jones and “early trading from these showrooms is in line with our expectations at the time of the acquisition”.

It also completed a major expansion of the Patek Philippe space in Watches of Switzerland, Regent Street; opened two monobrand boutiques for TAG Heuer and Tudor at Gatwick airport; and made progress on key projects, including the Flagship Rolex Boutique on Old Bond Street, plus the Audemars Piguet Townhouse and Mappin & Webb luxury jewellery boutique, both in Manchester, all opening in FY25.

Difficult year

The final quarter’s performance will have come as some relief after the first nine months of FY24 proved tough.

For the year, group revenue was up only 2% CC and flat on a reported basis at £1.538 billion.

While US revenue rose 11% CC and 6% reported to £692 million, UK & Europe revenue was down 5% at £846 million.

Luxury watches revenue rose 3% CC and only 1% reported, with demand continuing to outstrip supply for key brands.

But luxury jewellery revenue dropped 13% CC and 14% reported. That said, luxury branded jewellery continues to significantly outperform and during the year it added brands including Pomellato, Fred, Pasquale Bruni and Fabergé.

Cautious optimism

Despite that improvement in the last three months of financial year, Adjusted EBIT is expected to be between £133 million and £136 million, down from £165 million in the previous year.

But as mentioned, it’s still backing its long-term targets and expects to more than double sales and Adjusted EBIT by the end of FY28. For the current year, its revenue recovery should continue and it’s predicted to rise between 9% and 12% CC to reach between £1.67 billion and £1.73 billion.

CEO Brian Duffy said: “We finished the year strongly, with Q4 sales in line with guidance and ahead of consensus. Particularly pleasing was the performance in the US.

“We enter FY25 with cautious optimism. The inherent strength of the categories we operate in, coupled with our superior business model and retail expertise continues to set us apart.”