Watches of Switzerland shares plunge on weak update

Watches of Switzerland Group (WOSG) saw its shares falling over 28% on Thursday morning after it released a trading update that investors clearly didn’t like.

The shares are down over 40% over the past six months following some negative news last year, and the fall — plus today’s update — highlighted how the seemingly unstoppable growth it had been enjoying for a number of years wasn’t unstoppable after all.

So what did the latest release include? We didn’t get concrete figures as the business will report Q3 and nine-month trading in full on  8 February.

But it said that despite a positive start to the early part of Q3 FY24, WOSG then experienced “a volatile trading performance in the run-up to and beyond Christmas, as the challenging macro-economic conditions impacted consumer spending in the luxury retail sector. We now expect these challenging conditions to remain for the balance of our fiscal year”.

Across the UK and US, demand for its key brands continues to be strong, however, with net increases to Registration of Interest lists.  

By market, sales in the US remained strong with continued double-digit growth. The UK was more challenged, and this impacted a broad range of luxury watch brands and non-branded jewellery. There was an unusually high level of promotional activity in that jewellery category too. 

The company said that “in light of the recent challenging trading conditions and based on a more cautious view of the outlook for the remainder of the fiscal year, management is now providing revised full-year guidance for FY24, which assumes no recovery in consumer demand and reflects discussions with key brands”.

It didn’t share any details about what those discussions might mean.

CEO Brian Duffy said: “The festive period was particularly volatile this year for the luxury sector, with consumers allocating spend to other categories such as fashion, beauty, hospitality and travel. Whilst we are disappointed with this trend, we are encouraged by our market share gains in both the US and UK.

“We remain confident in the markets in which we operate, our model and the delivery of our Long Range Plan announced to the market in November 2023.”

The firm’s guidance is now for FY24 revenue of between £1.53 billion and £1.55 billion compared to previous guidance that was for a range of £1.65 billion to £1.7 billion. That means a revenue increase at constant exchange rates of between 2% and 3% compared to a rise between 8% and 11% as previously predicted.

The EBIT margin was previously predicted to be in line with the prior year but will now come in between 8.7% and 8.9%. Total finance costs will also be higher this time at £6 million compared to a prediction of £5 million before.