Watches of Switzerland Group Plc shares fell as much as 12% after reporting that first quarter sales will decline in a sign of potentially less buoyant times for luxury watch retailers.
(Bloomberg) — Watches of Switzerland Group Plc shares fell as much as 12% after reporting that first quarter sales will decline in a sign of potentially less buoyant times for luxury watch retailers.
The top seller of Rolex timepieces in the UK said Wednesday that the challenging environment of the last six months is continuing into the current fiscal year. It blamed the timing of product deliveries from brands as the reason for the expected sales decline.
“More than half of our business is driven by supply and you can never predict the exact timing” of deliveries, Chief Executive Officer Brian Duffy said in an interview.
Duffy said it would “be misleading if people are focusing on that as any indication of the market or business overall.”
The company expects sales growth to rebound in its second quarter.
Still, the forecast underscores a potential cooling of the red-hot luxury watch market, which saw unprecedented demand for brands including Rolex, Patek Philippe and Audemars Piguet during the pandemic.
Watches of Switzerland is the largest luxury watch dealer in the UK and has 193 showrooms and boutiques worldwide. It has been expanding rapidly in the US, the biggest market for high-end timepieces.
The company still expects sales in the current fiscal year to rise to between £1.65 billion and £1.7 billion, a gain of 8% to 11% at constant currencies and in line with analyst consensus forecasts. Duffy said waitlists for the most in-demand watch models are continuing to grow.
The company plans to open an Audemars Piguet boutique in Manchester next year as well as a store selling Rolex-sister brand Tudor on London’s Old Bond street.
The company is “strongly positioned to sustain its growth trajectory,” overall with sales returning to normal in the second quarter,” said Eleonora Dani, an analyst at Shore Capital Markets.
“Downgrades will no doubt test the conviction of some shareholders,” Barclay’s analyst Richard Taylor said in a report, but added that the company’s “long-term opportunity remains significant to become a clear market leader in the US and to capitalise on similar opportunities in Europe.”
–With assistance from Lisa Pham.
(Updates with CEO comments beginning in paragraph 3)
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