Watches of Switzerland ups outlook after 20% sales surge

Luxury retailer Watches of Switzerland has seen shares soar after upping its full-year outlook due to better-than-expected demand.

The group – Britain’s biggest retailer of Rolex, Cartier, Omega, TAG Heuer and Breitling watches – said constant currency revenues jumped by a fifth in the first 10 weeks of its second quarter to October 25.

Shares surged by as much as 24% as Watches of Switzerland (WoS) raised its full-year sales guidance to between £880 million and £910 million and said earnings margins are also set to beat previous expectations.

It had previously pencilled in annual sales of between £840 million and £860 million.

But the group added that sales growth is expected to slow in its third quarter due to retail disruption amid the coronavirus pandemic, while trading in the travel and tourist sectors is unlikely to improve.

Its trading update showed UK sales rose 12.6% to £145.1 million in the 10 weeks of the second quarter so far, with online growth of 50%.

It said strong demand from British shoppers was offsetting the hit from lower tourist and airport business during the crisis.

Tourist and airport sales now account for less than 10% of group sales – at 9.2% – down from a third a year ago.

The firm has also seen regional stores fare better in the UK than London outlets, where it said shopper numbers remain weak.

In the US, it has seen an “exceptionally strong” performance after constant currency sales raced 43.4% higher to £57.7 million.

WoS chief executive Brian Duffy said: “Trading momentum has further improved in the second quarter.

“Stronger-than-anticipated UK domestic sales are offsetting lower tourist and airport traffic, whilst regional stores are continuing to outperform London stores.

“Furthermore, the strong momentum we have established in the US has further accelerated.”

He added: “Our guidance for the balance of the fiscal year assumes that the positive trend experienced in the second quarter will be moderated by the impact of pandemic-related retail disruption in the UK and the US and uncertainty in the US economy, impacting mainly in the third quarter.”

Greg Lawless, an analyst at Shore Capital said the update from WoS shows that “demand for luxury watches continues to outstrip supply”.

“In our view, this is a management team executing its strategy well and adapting to the unprecedented market conditions,” he said.