Watches of Switzerland profits rise as online sales surge

The luxury watch specialist posted a 26.5% uplift in adjusted EBITDA to £52.2m during the 26 weeks to October 25.

On a statutory pre-tax basis, the retailer swung back into the black, recording a profit of £36.2m compared to a £9m loss during the first half of last year.

Watches of Switzerland’s total sales slipped 2.6% on a constant currency basis to £428.7m having been dented by store closures during lockdowns and other restrictions on non-essential retailers. The business said its stores were only able to trade for 59% of their total potential hours during the first half.    

But ecommerce sales jumped 65.4% during the six-month period to offset some of the sales lost through its store portfolio.

Sales in its core UK market were down 7.4% during the half amid “significant headwinds” including store closures and a slump in tourist numbers impacting footfall.

By contrast, revenues rose 11% in the US, aided by the acquisition of vintage and pre-owned watch business, Analog Shift.

Despite the impact on its top line, Watches of Switzerland hailed “strong trading” during its second quarter, when revenues rose 21.5% in constant currency terms, and said its third quarter had gotten off to a “stronger than anticipated start”.

On a constant currency basis, group sales were up 11.9% in the seven weeks to December 13, with the UK registering a 7.7% uptick and the US growing 22.7%.

It now expects full-year revenues to come in between £900m and £925m, compared to previous guidance of £880m to £910m.

EBITDA margin is expected to increase between 1.5% and 2% compared to 2019/20. It had previously forecast an increase in the region of 1% to 1.5%.

Watches of Switzerland now plans to repay furlough support received from the Government as a result of what boss Brian Duffy described as “very strong performance”.

Duffy said: “Despite significant headwinds throughout the period, we achieved a good sales performance with domestic customers offsetting lower tourist and airport sales in the UK, and elevated momentum in the US.

“As a result of our stronger than anticipated first half performance and positive trading in the first part of Q3, we have revised our full year guidance upwards. Our guidance assumes some further negative trading impact from potential lockdown measures in January and February 2021.

“We have also taken into account the removal of tax-free shopping in the UK from January 1, 2021. We believe that the UK Government has misjudged the impact of removing tax-free shopping for tourists and we will continue to support all efforts to have this changed.”