- Shares fell 30% in morning trading
- Full year 2024 guidance revised downwards
- Blames challenging macro-economic conditions
Shares in Watches of Switzerland (WOSG) were down as much as 30% at one point in morning trading to 408p as the luxury watch-to-high end jewellery retailer said volatile Christmas trading and post-Christmas trading had a knock-on effect for full year 2024 revenue.
The Rolex seller has now revised full year guidance for 2024 downwards to £1.53 billion-to-£1.55 billion from previous guidance of £1.65 billion-to-£1.70 billion.
What to expect from Watches of Switzerland’s second-quarter update
The company cited ‘challenging macro-economic conditions’ which ‘impacted consumer spending in the luxury retail sector.’
LUXURY GOODS SECTOR DOWNTURN
Russ Mould, AJ Bell investment director said: ‘Watches of Switzerland continues to suffer from the downturn in the luxury goods market and a nice Rolex or fancy Omega were not in Santa’s sleigh a month ago.
‘Retail trends indicate consumers have prioritised experiences such as foreign holidays over big-ticket items in recent months and that has meant fewer people have given Watches of Switzerland the time of day. This has extended problems for the company which emerged last year where sales growth slowed and the watch market was flooded with second-hand timepieces, weighing on prices.
‘Watches of Switzerland then saw another leg down in its share price after Rolex bought one of its rivals, Bucherer, and investors feared that would give it a direct-to-consumer sales channel. Watches of Switzerland fought back, insisting it would still play a vital role in the distribution of Rolex products, but investors weren’t so sure.
‘The shares are now trading at their lowest level since November 2020 as the market has turned sceptical over the company’s ability to keep growing at the rapid clip seen during the pandemic. The luxury goods market has taken a beating over the past few months as wealthier individuals’ spending habits changed, implying that even the rich aren’t immune from higher interest rates.’
BURBERRY WARNING
This warning comes as no surprise to investors familiar with the luxury retail sector which is currently experiencing a slowdown as even the super-rich readjust to the higher interest rate environment and the cost-of-living crisis.
Last week Burberry (BRBY) issued its second profit warning in as many months as sales succumbed to the global economic slowdown, demand in China, US and Korea waning as customers cut back on spending.
Watches of Switzerland will announce a third quarter trading update for the 13 and 39 weeks ending 28 January 2024 on 8 February.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell.
