Watches of Switzerland’s profits climb by 25% due to strong US trading

Profits at Watches of Switzerland Group have jumped by a quarter following significant expansion in the US.

The timepiece retailer reported earnings of £64.6million for the six months ending 30 October, compared to £51.6million in the equivalent period last year.

Though worsening inflationary pressures are imposing a much greater squeeze on consumers’ incomes across western countries, the luxury sector appears to be bucking the economic gloom with rising demand.

Watches of Switzerland’s sales in the US soared by 86 per cent thanks to higher jewellery purchases and the opening of six boutique stores selling goods from brands including TAG Heuer, Breitling, and Grand Seiko.

The country is the world’s biggest market for luxury Swiss watches, having overtaken China the prior year, and now provides over 40 per cent of the company’s turnover.

By contrast, the firm’s UK and European sales only grew modestly due to jewellery purchases flatlining against a strong comparative performance when loosening Covid restrictions brought about a resurgence in weddings and social occasions.

This was despite launching 13 new stores, five of them in London’s Battersea Power Station, two in Canary Wharf and two each in Stockholm and Copenhagen.

The FTSE 250 business plans to open another seven mono-brand boutiques in Britain and the US by the end of April, as well as an Omega outlet in the Swedish capital and a TAG Heuer shop in Dublin, Ireland.

Russ Mould, investment director at AJ Bell, said: ‘While some people may only be able to afford small Christmas presents this year, there is also a large group of individuals who still have the means to splash the cash.

‘That might explain why demand remains very strong for luxury goods such as Rolex watches. Many people are on waiting lists for watches, such is the demand, and a lot of these won’t even put the product on their wrist once obtained.

‘It’s about prestige – either displaying the watch in a cabinet at home or storing it safely in the hope that it appreciates in value.’

The global luxury industry is set to grow by 21 per cent to €1.4trillion in 2022, with ‘Gen Y’ and ‘Gen Z’ driving much of the expansion, according to recent analysis by Bain & Company and Italian luxury goods manufacturers’ industry trade body Altagamma.

The report predicts the sector will continue growing next year against a poorer economic backdrop, as it displays greater resilience than during the global financial crisis, partly because of a ‘larger and more concentrated’ customer base.

Watches of Switzerland has continued to maintain its annual guidance as it revealed trading in the first six weeks of the third quarter had been commensurate with forecasts.

Its chief executive, Brian Duffy, said: ‘We look ahead with confidence as we continue to deliver on our…objectives of maintaining our leadership position in the UK, becoming the clear leader in the US, and capitalising on the growth potential in Europe.’

In spite of the positive trading update, Watches of Switzerland Group shares were 6.7 per cent lower at 894.5p on Wednesday morning, making it one of the biggest fallers on the FTSE 350 Index