Watches of Switzerland sees UK weakness in Christmas quarter, but US is strong

Watches of Switzerland Group has released an update for Q3 and the first nine months of the financial year (up to 28 January) with both sets of figures clearly highlighting the challenges the upscale watches and jewellery retailer is facing at the moment.

Q3 FY24 group revenue fell 3% to £397 million and was down 1% at constant currency (CCY). And 9M FY24 revenue fell 1% to £1.158 billion, although it was up 1% CCY.

As the company had said in an update in the middle of January, trading during the festive period was tougher than it had expected, especially in the UK as demand for discretionary luxury purchases slowed.

That said, demand for its key brands, “particularly products on the Registration of Interest lists, continues to be strong, with consistent additions and conversions”.

Q3 sales of luxury watches rose 1% CCY to £336 million, representing 85% revenue, but luxury jewellery was down a massive 16% CCY to £34 million. It said “growth in luxury branded jewellery [was] offset by weaker performance in non-branded jewellery”.

Group e-commerce revenue fell 15% on last year at reported rates, impacted by the “mix of products through this channel and performance of the UK market”.

But it saw “continued positive momentum within pre-owned”.

As well as the pre-owned news, there some other bright spots during the quarter as US revenue rose 8% CCY and was up 3% reported at £175 million.

And nine-month US revenue rose 10% CCY and 5% reported to £502 million. US sales remained strong across all regions with “sustained growth reflecting the success of our model and strength of client demand”. It also said it’s “gaining market share in the fragmented US luxury watch market”.

But UK & Europe revenue of £222 million was down 7% in Q3 and nine-month revenue was down 5% to £656 million.

As mentioned, it “saw unusually high levels of promotional activity” in non-branded jewellery with “consumers allocating discretionary spend to other categories such as fashion, beauty, hospitality and travel over this period”.

But it continued to gain share in the luxury watch market “due to our differentiated offering”.

The UK performance “continues to be driven by domestic clientele with minimal return of tourist spending due to the lack of VAT-free shopping”.

It also confirmed its guidance from its 18 January update with revenue growth of 2-3% CCY for the whole of FY24.

The guidance reflects the “current visibility of supply from key brands and confirmed showroom refurbishments, opening and closures, and excludes uncommitted capital projects and acquisitions”. 

It also means the trading conditions experienced in Q3 in the UK and US are expected to continue over the remainder of the fiscal year.

The guidance also includes the new Watches of Switzerland multi-brand showroom at One Vanderbilt, New York due to open in March.