Watches of Switzerland hit by weaker summer trade

Watches of Switzerland Group has seen summer sales drop modestly despite continued healthy demand in the US.

The luxury good brand’s sales fell by 1 per cent at constant currency levels to £382million for the 13 weeks ending 30 July, in line with forecasts.

Purchases of both watches and jewellery products declined from bumper prior-year comparators, with the latter also affected by weaker consumer sentiment and a shift to full-price trade in the US. 

New store launches and higher sales volumes boosted US revenues by 10 per cent to £163million, but revenues sank by 8 per cent across the larger UK and European market.

The FTSE 250 company blamed its result in the latter region on changes in the timing of product deliveries to the UK, which had benefited the business during the previous quarter.

Watches of Switzerland’s latest trading update marks a reversal from the last fiscal year when it achieved another record annual performance on the back of higher average selling prices and new showroom openings.

It has upheld its annual guidance for revenues to increase to between £1.65billion and £1.7billion as the firm anticipates returning to ‘more normalised growth rates in the balance of the financial year’.

Yet the group is ploughing ahead with a significant expansion plan, which includes opening 20 mono-brand boutique outlets this year.

Demand for luxury watches is also outpacing supply, while waiting lists are getting longer, even as selling prices continue rising.

Russ Mould, investment director at AJ Bell, said: ‘A market where demand is outstripping supply is never a bad one to be in and whether time is running out on the company’s strong run, for now, it is ticking along very nicely indeed.’

The global luxury goods industry has defied the slowdown affecting the broader retail sector, partly due to demand rebounding in Asia following the loosening of Covid-related restrictions.

However, retailers in Britain have complained that the abolition of VAT-free shopping two years ago has substantially impacted trade, because tourists are instead choosing to travel to other prominent European shopping destinations.

Brian Duffy, chief executive of Watches of Switzerland, has called on the ‘tourist tax’ to be abolished, recently telling the Daily Mail that there was ‘absolutely no question’ it was hurting retailers and the UK economy.

Watches of Switzerland Group shares were 2.1 per cent, or 14.5p, higher at 695p on late Thursday morning but have dropped by approximately 17 per cent so far this year.