Watches of Switzerland shares surge on 'cautiously optimistic' outlook, Q4 sales

Shares in Watches of Switzerland surged 15% on Thursday as the luxury timepiece retailer said it was “cautiously optimistic” about future trading after a 4% rise in sales in the final quarter of its financial year driven by a strong performance in the US.

Group revenue came in at £380m in the 13 weeks to April 30. US sales were up 14% to £190m but fell 4% to the same figure in the UK and Europe due to a lack of wealthy tourist spending in response to the British government’s ban on VAT- free shopping for visitors.

Full-year group revenue rose 2% on a constant-currency basis to £1.53bn as a strong rise in the US was offset by macroeconomic conditions in the UK. WoS forecast adjusted operating profit of between £133m - and £136m, down from 2023’s £165m.

Looking ahead for fiscal 2025, the seller of Rolex watches expects adjusted core earning to increase by just 0.2-0.6%.

The company forecast revenue of £1.67 - 1.73bn. Chief executive Brian Duffy said the company is "committed to the targets to more than double sales and adjusted EBIT by the end of FY28".

AJ Bell head of financial analysis, Danni Hewson said the "stellar growth in a cost-of-living crisis shows that not everyone is short of money".

“The market has previously worried that the luxury goods market might not be as resilient as previously thought. Second-hand Rolex prices have weakened, with the decline attributed to people who had previously won big on crypto flooding the market with the watches they had bought to show off their new-found wealth.

"As crypto prices fell back, many people playing that game reassessed their finances and offloaded some of their assets."

“There have been cracks elsewhere in the luxury goods sector, such as falling diamond prices. Watches of Switzerland even reported a ‘more challenging trading environment’ in May, which naturally pulled extended earlier share price losses as investors pondered if the luxury goods boom had passed its peak."

“Therefore, today’s announcement that everything is still going swimmingly has caught investors by surprise, hence the 11% share price jump. More people are getting on the company’s list to buy watches, average selling prices are moving higher, and expansion plans are going well, putting Watches of Switzerland ahead of its long-range plan.

“Despite the uncertain economic backdrop, the fact Watches of Switzerland hasn’t downgraded its guidance has been taken as a massive positive in the eyes of investors.”

Reporting by Frank Prenesti for Sharecast.com