REG - Watches of Switzlnd. - Q1 FY23 Trading Update

Watches of SwitzerlandAnnouncement

16/08/2022 07:00

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RNS Number : 0892W  Watches of Switzerland Group PLC  16 August 2022

16 August 2022

 

Watches of Switzerland Group PLC

Q1 FY23 Trading Update

for the 13 weeks (Q1 FY23) to 31 July 2022

 

Strong start to the year with waitlists continuing to extend

Performance driven by strength of our business model and market sector
conditions

 

Brian Duffy, Chief Executive Officer, said:

"The first quarter continued with strong momentum throughout, and we carry
this positive momentum into the second quarter. Despite the well-publicised
concerns about the macro-environment, demand for our products remains robust
with client registration of interest lists continuing to extend.

 

"The luxury watch market is dynamic with exciting developments on new products
and marketing across a broad range of brands.

 

"Within a large, diffuse and growing market, we are benefitting from our
distinctive business model - namely our investment in leading store design,
the strength of our brand partnerships, our international scale, our bold
marketing campaigns, our advanced systems technology, and our dedication to
client experience.

 

"We continue to focus on attracting new clients and growing market share in
the UK and US. We have seen positive early results from our expansion into
Europe. As we continue to invest in our multichannel model and new incremental
projects, we remain confident in our long range plan.

 

"We have an exciting and growing pipeline of new projects, and I am pleased to
announce that we will relocate the current Rolex Boutique on Bond Street (900
sq ft) to a new 7,200 sq ft location on Old Bond Street in 2023. This new
flagship will reflect the importance of the London market and the special
relevance of London to the history of Rolex."

 

·      Group revenue £391 million (Q1 FY22: £297 million), +25% at
constant currency, +31% at reported rates

o  Strong performance against a particularly strong comparative in the UK
with Q1 FY21 benefitting from de-stocking and pent up demand as showrooms
re-opened following the COVID-19 lockdown

o  Luxury watches +32% to £342 million, representing 87% of revenue (Q1
FY22: 87%)

o  Luxury jewellery performing well +36% to £27 million

o  Continued strength in group ecommerce sales +14% vs last year at reported
rates with ongoing investment in our multi-channel strategy

o  Xenia, the Group's elevated Client Experience Programme, now embedded
across all showrooms further enhancing the relationship we have with our
clients

o  Opening of first European mono-brand boutique in Stockholm. Early trading
in line with expectations with five further showrooms opening in FY23

o  Growing pre-owned business following the successful relaunch of
Analog:Shift in the US and investment in UK resource. Pricing and margins
maintained

 

·      Further acceleration in the US with revenue of £152 million,
+76% vs Q1 FY22 at constant currency, +100% at reported rates relative to Q1
FY22

o  Revenue growth excluding acquisitions +58% at constant currency, with
newly acquired stores performing well

o  Strong underlying growth driven by higher volumes, reflecting success of
our model and the strength of client demand

o  New showroom acquisition, anchored by Rolex, opened in New Jersey in July

o  Opened mono-brand boutique with Breitling in Lennox Mall Atlanta, Georgia

 

·      Strong UK sales growth with revenue of £239 million, +8% vs Q1
FY22

o  Performance continues to be driven by resilient domestic clientele with
strength across the UK

o  Ongoing improvement in airport business as traffic recovers, with all
airport showrooms now reopen

o  Store development programme continues with several projects completed in
the period:

§ Significant enhancements to our Watches of Switzerland flagship Regent
Street multi-brand showroom

§ Two showrooms refurbished in the Goldsmith Luxury concept: Bluewater, Kent
and Victoria Square, Belfast

§ Opened a mono-brand boutique in July with TUDOR in Bristol Cribbs Causeway
and at the beginning of August, a mono-brand boutique with Breitling in
Meadowhall Sheffield

 

Outlook

·     While we continue to monitor the wider macro-economic environment,
we believe that the strength of the luxury watch category, with its unique
supply/demand dynamics, together with the success and agility of our model
will continue to support long-term sustainable strong sales growth

·     Our FY23 guidance reflects current visibility of supply of key
brands and confirmed showroom refurbishments, openings and closures and
excludes uncommitted capital projects and acquisitions

 

·      The Group reiterates its previous guidance for FY23 on an organic
pre-IFRS 16 basis, which anticipates a potentially more challenging trading
environment in the second half of FY23:

o  Revenue:                       £1.45 - £1.50
billion

o  Adjusted EBITDA %:     flat to +0.5%

o  Depreciation:                £33 - £35 million

o  Adjusted EBIT:               £157 - £169 million

o  Total finance costs:      c£4.5 million

o  Underlying tax rate:     21.5% - 22.0%

o  Capex:                            £70 - £80
million including new offices in the UK

o  Year-end net cash:       £35 - £45 million

The equivalent guidance on an IFRS 16 basis is:

o  Adjusted EBIT:              £172 - £184 million

o  Depreciation:                £79 - £83 million

o  Total finance costs:      £18 - £21 million

 

·      The Group is exposed to movements in the £/$ exchange rate when
translating the results of its US operations into Sterling. Guidance assumes a
£/$ 1.30 exchange rate, with a five cent move resulting in an adjustment of
c.£25 million to full year Group revenue and c.£3 million on full year
Adjusted EBIT, on a pre-IFRS 16 basis

 

Q1 FY23 Revenue Performance by Geography
                Q1 FY23      Q1 FY22         Q1 FY23 vs Q1 FY22
                13 weeks to  13 weeks to     YoY %       Constant currency YoY %

                31 July      1 August 2021

 (£m)           2022

 UK and Europe  239          221             8%          n/a
 US             152          76              100%        76%
 Group Revenue  391          297             31%         25%

 
Q1 FY23 Revenue Performance by Category
                   Q1 FY23      Q1 FY22         Q1 FY23 vs Q1 FY22
                   13 weeks to  13 weeks to     YoY %

                   31 July      1 August 2021

 (£m)              2022

 Luxury watches    342          259             32%
 Luxury jewellery  27           20              36%
 Other             22           18              19%
 Group Revenue     391          297             31%

 

Conference call

A conference call for analysts and investors will be held at 9.00am (UK time)
today. To join the call, please use the following details:

 

Dial-in: +44 (0) 20 3936 2999

Conference access code: 348294

 
Contacts

The Watches of Switzerland Group

 Bill Floydd, CFO                                                             +44 (0) 207 317 4600
 Stephanie Crinnegan, Director of Investor Relations & Corporate Affairs      +44 (0) 776 710 0603

investor.relations@thewosgroup.com (mailto:investor.relations@thewosgroup.com)

 

Headland

 Lucy Legh / Joanna Clark / Will Smith                            +44 (0)20 3805 4822

wos@headlandconsultancy.com (mailto:wos@headlandconsultancy.com)

 

About the Watches of Switzerland Group

The Watches of Switzerland Group is the UK's largest luxury watch retailer,
operating in both the UK and US, comprising five prestigious brands; Watches
of Switzerland (UK and US), Mappin & Webb (UK), Goldsmiths (UK), Mayors
(US) and Betteridge (US), with a complementary jewellery offering.

 

As at 31 July 2022, the Watches of Switzerland Group had 173 showrooms across
the UK and US including 58 dedicated mono-brand boutiques in partnership with
Rolex, OMEGA, TAG Heuer, Breitling, TUDOR, Audemars Piguet, Grand Seiko,
BVLGARI and FOPE and has a leading presence in Heathrow Airport with
representation in Terminals 2, 3, 4 and 5 as well as seven retail websites.

 

The Watches of Switzerland Group is proud to be the UK's largest retailer for
Rolex, OMEGA, Cartier, TAG Heuer and Breitling watches.

 

Mappin & Webb holds Royal warrants as goldsmiths, silversmiths and
jeweller to Her Majesty The Queen and silversmiths to His Royal Highness The
Prince of Wales. The Mappin & Webb master jeweller has been Crown
Jeweller, custodian of the Crown Jewels of Her Majesty The Queen since 2012.

 

Disclaimer

This announcement has been prepared by Watches of Switzerland Group PLC (the
'Company'). It includes statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "anticipates", "expects", "intends", "plans", "goal",
"target", "aim", "may", "will", "would", "could" or "should" or, in each case,
their negative or other variations or comparable terminology. They appear in a
number of places throughout this announcement and the information incorporated
by reference into this announcement and may include statements regarding the
intentions, beliefs or current expectations of the Company Directors or the
Group concerning, amongst other things: (i) future capital expenditures,
expenses, revenues, earnings, synergies, economic performance, indebtedness,
financial condition, dividend policy and future prospects; (ii) business and
management strategies, the expansion and growth of the Group's business
operations; and (iii) the effects of government regulation and industry
changes on the business of the Company or the Group.

 

By their nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may or may not
occur in the future and may be beyond the Company's ability to control or
predict. Forward-looking statements are not guarantees of future performance.
The Group's actual results of operations, financial condition, liquidity, and
the development of the industry in which it operates may differ materially
from the impression created by the forward-looking statements contained in
this announcement and/or the information incorporated by reference into this
presentation.

 

 

Any forward-looking statements made by or on behalf of the Company or the
Group speak only as of the date they are made and are based upon the knowledge
and information available to the Directors on the date of this announcement,
and are subject to risks relating to future events, other risks, uncertainties
and assumptions relating to the Company's operations and growth strategy, and
a number of factors that could cause actual results and developments to differ
materially from those expressed or implied by the forward-looking statements.
Undue reliance should not be placed on any forward-looking statements.

 

Before making any investment decision in relation to the Company you should
specifically consider the factors identified in this document, in addition to
the risk factors that may affect the Company or the Group's operations which
as detailed above.

 

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