- First-half pre-tax profit down
- But EBIT beats forecasts
- ‘Strong start’ to Christmas quarter
Shares in Watches of Switzerland (WOSG) rallied 8% to 540p after the luxury timepiece retailer clocked up better-than-feared first-half earnings and left full-year 2025 guidance unchanged, drawing confidence from recently-improved sales momentum and some large showroom openings to come.
There was relief among investors as the Rolex, Patek Philippe and Audemars Piguet seller reported a strong start to the third quarter including Christmas.
Shore Capital dubbed this a ‘reassuring moment’ for the FTSE 250 company, which also called out the ‘continued stabilisation’ of UK luxury watch and jewellery markets which had proved volatile during the prior-year period.
MODEST EBIT BEAT
Results for the half to 27 October 2024 from the UK’s largest luxury watch retailer showed a 3% revenue uptick to £785 million as strong US growth offset a more subdued sales showing in the UK and Europe.
After acquisition costs and amid weaker margins, Watches of Switzerland’s 10% decline in adjusted EBIT (earnings before interest and tax) to £66 million proved slightly better than consensus feared, though a higher finance bill meant pre-tax profit fell 39% to £41 million.
The Cartier-to-TAG Heuer watch hawker ended the half with £120 million of net debt on the balance sheet following the acquisitions of Italian luxury jewellery brand Roberto Coin and publishing firm-to-luxury watch platform Hodinkee.
WHAT DID THE CEO SAY?
Chief executive Brian Duffy commented: ‘We are pleased to report H1 FY25 revenue growth of 4% in constant currency reflecting an encouraging improvement in trading in Q2, driven by growing demand in the UK and US, and consistent growth in client registration lists, along with the acquisition of Roberto Coin in the period.’
He insisted the newly-purchased Roberto Coin business had traded ‘strongly’ since acquisition and the integration is progressing well.
‘Additionally, we acquired Hodinkee, a leading global digital platform for luxury watch enthusiasts, further strengthening our online sector leadership. Integration is progressing in line with our expectations.’
REBUILDING ROBUSTNESS
Shore Capital said all in all, ‘we feel this update from Watches of Switzerland will appear quite resilient to the market, most certainly against the weak backdrop a year ago, which should assist in rebuilding the aura of robustness around the credibility and deliverability of ongoing earnings, which has the basis with delivery to further support the group’s shares, in our view.’
