Shares in Watches of Switzerland Group PLC dropped by more than a quarter on Thursday, after the retailer said a challenging period of sales had necessitated revisions to annual guidance.
The stock was down 27% to 427.80 pence each in London on Thursday morning.
The Leicester, England-based watch retailer, whose key brands include Rolex, Cartier and Patek Phillipe, said it had experienced a ‘volatile’ trading performance during the festive season.
Watches pointed to the impact of ‘challenging economic conditions’ on consumer spending and warned that these circumstances would continue for the remainder of its financial year, which goes to the end of April.
While demand for key watch brands continues to be strong in the US, with double-digit sales growth, the UK market proved to be more challenging, impacting a ‘broad range’ of its luxury watch brands and non-branded jewellery. Watches said that this necessitated ‘an unusually high level of promotional activity in non-branded jewellery’.
As far back as October, the company had noted a ‘challenging’ market backdrop in the UK and Europe.
As a result, Watches has adopted a more ‘cautious outlook’ for financial 2024 and revised its guidance for the full year.
Watches of Switzerland now forecasts between £1.53 billion and £1.55 billion in revenue for the year, down from previous guidance of £1.65 billion to £1.70 billion and stable with £1.54 billion in financial 2023.
Constant currency revenue growth of is expected at between 2% and 3%, down from previous guidance of 8% to 11%, while its estimate of margin on earnings before interest and tax has been downgraded to between 8.7% and 8.9% from 10.7%, which would have been stable on financial 2023.
Financing cost guidance has increased to around £6 million from £5 million, while capital expenditure remains in line with previous guidance at between £70 million and £80 million.
Chief Executive Officer Brian Duffy said: ‘The festive period was particularly volatile this year for the luxury sector, with consumers allocating spend to other categories such as fashion, beauty, hospitality and travel. Whilst we are disappointed with this trend, we are encouraged by our market share gains in both the US and UK.
‘We remain confident in the markets in which we operate, our model and the delivery of our long range plan announced to the market in November 2023.’
In November, Watches announced its ‘long range plan’ to double sales and profits by 2028.
The company will provide a trading update for the 13- and 29-week periods ending January 28 on February 8.
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