REG - Watches of Switzlnd. - Q4 FY24 Trading Update

Watches of SwitzerlandAnnouncement

16/05/2024 07:00

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RNS Number : 6330O  Watches of Switzerland Group PLC  16 May 2024

16 May 2024

 

 

Watches of Switzerland Group PLC

Q4 FY24 Trading Update

for the 13 weeks (Q4 FY24) and 52 weeks (FY) to 28 April 2024

 

FY24 performance in line with guidance

FY25 outlook reflects cautious optimism

Reiterating Confidence in Delivering Long Range Plan Financial Targets

 

 

Brian Duffy, Chief Executive Officer, said:

"We finished the year strongly, with Q4 sales in line with guidance and ahead
of consensus. Particularly pleasing was the performance in the US, with sales
up 14% in the period.

 

"We are confident that our strategy, exceptional client service and strong
brand relationships enables us to continue to drive growth and gain market
share.  We have seen growth in our Registration of Interest lists for sought
after products, and exceptionally strong performance of pre-owned,
particularly Rolex Certified Pre-Owned. Our acquisition of Roberto Coin Inc.
(the exclusive North American distributor of Roberto Coin) dramatically
accelerates our luxury branded jewellery strategy, and we see enormous
potential in bringing together this iconic brand with our retailing expertise.

 

"We enter FY25 with cautious optimism. We have a terrific programme of
showroom developments on both sides of the Atlantic with the Rolex flagship
boutique on Old Bond Street, London; a 3,000 sq. ft Rolex boutique replacing
the Mayors multi-brand in Atlanta, Georgia; and our first Rolex showroom in
Texas in Plano. We are also looking forward to the Audemars Piguet Town House
and the Mappin & Webb luxury jewellery showroom both in Manchester, and
the expanded Patek Philippe space in Greenwich, Connecticut.

 

"The inherent strength of the categories we operate in, coupled with our
superior business model and retail expertise continues to set us apart. We
remain focused on executing our Long Range Plan and are committed to the
targets to more than double sales and Adjusted EBIT by the end of FY28."

 

 

Q4 FY24 Highlights

Group revenue £380 million, +4% vs Q4 FY23 at constant currency, +3% at
reported rates

·      Q4 FY24 luxury watches revenue +5% at constant currency, +3% at
reported rates, with particularly strong performance in the US

·      Demand for our key brands, particularly products on the
Registration of Interest lists, continues to be strong, with consistent
additions and conversions

·      Continued market share gains in the luxury watch market in both
the UK and US as a result of our differentiated offering

·      Rolex Certified Pre-Owned (Rolex CPO) performing ahead of
expectations, with further roll-out of doors planned in FY25 as supply
conditions in the UK improve

·      Total pre-owned and vintage (including Rolex CPO) revenue doubled
in Q4 FY24 against prior year

·      Q4 FY24 saw a significant improvement in jewellery performance:

o  Flat on last year in constant currency, -1% at reported rates with
sequential improvement from -16% year on year in Q3 FY24 in constant currency,
-18% at reported rates

o  Significant outperformance by luxury branded jewellery

 

 

Performance by Geography:

US revenue £190 million, +14% on last year at constant currency, +10% at
reported rates

·      US sales remained strong across all regions

·      Sustained growth reflecting the success of our model and strength
of client demand

·      Showroom development programme continues: Watches of Switzerland
One Vanderbilt, New York opened in March 2024

·      Secured a new Rolex mono-brand boutique in Lenox, Atlanta;
opening in FY25, replacing the existing Mayors multi-brand

·      On 8 May 2024, the Group acquired the entire share capital of
Roberto Coin Inc., the exclusive distributor of Roberto Coin in the US,
Canada, Central America and Caribbean for $130 million(1). This acquisition
represents a significant milestone in the Group's luxury branded jewellery
strategy as outlined in the Long Range Plan

 

 

UK & Europe revenue £190 million, -4% vs prior year, showing sequential
improvement from Q3 FY24

·      Continued to gain market share in the luxury watch market due to
our differentiated offering despite the challenging macroeconomic conditions

·     Sales trends year on year at -4% progressed in Q4 versus Q3 (-7%),
supported by an improvement in jewellery sales

·     UK performance continues to be driven by domestic clientele with
minimal return of tourist spending due to the lack of VAT free shopping

·     Rebranding, colleague training and system conversions completed
for the showrooms acquired from Ernest Jones.  Early trading from these
showrooms is in line with our expectations at the time of the acquisition

·     Ecommerce revenue(2) -20% on last year, impacted by the mix of
products through this channel and performance of the UK market

·     Showroom development programme continues with several projects
completed in the period:

o  Major expansion of the Patek Philippe space in Watches of Switzerland, 155
Regent Street, London

o  Opened two mono-brand boutiques for TAG Heuer and TUDOR at Gatwick
airport, South Terminal

o  Progress made on important projects, including the Flagship Rolex Boutique
on Old Bond Street, London, Audemars Piguet Townhouse, Manchester and Mappin
& Webb luxury jewellery boutique, Manchester, all opening in FY25

 

 

FY24 Highlights

 

Group revenue £1,538 million, +2% at constant currency on prior year, flat at
reported rates

·      US revenue £692 million, +11% at constant currency, +6% at
reported rates

·      UK & Europe revenue £846 million, -5%, impacted by
macroeconomic conditions in the UK

·      Luxury watches revenue +3% in constant currency, +1% reported,
with demand continuing to outstrip supply for key   brands

·      Luxury jewellery revenue -13% in constant currency, -14%
reported, with Q4 FY24 the best performing period.  Luxury branded jewellery
continues to significantly outperform in jewellery

·     Addition of prestigious luxury jewellery brands within the
portfolio, including the introduction of Pomellato, FRED, Pasquale Bruni and
Faberge

·     Adjusted EBIT(3) expected to be between £133 million and £136
million (FY23: £165 million)

·     Operating cash conversion expected to be c.66% with net cash of
£1 million as at 28 April 2024 (30 April 2023: net cash £16 million), after
accounting for £44 million acquisition in the year (the acquisition of
Roberto Coin Inc. for $130 million completed post period end)

 

 

Long Range Plan (LRP) Update

·     We remain confident in the LRP targets to more than double sales
and Adjusted EBIT by the end of FY28

·     The initial performance of Rolex CPO has been ahead of our
expectations, and we expect Rolex CPO to outperform the targets previously
outlined in the LRP

·     Given the recent acquisition, we see further growth opportunities
for Roberto Coin Inc. ahead of what was previously assumed within the LRP

·     We have the strongest ever pipeline of committed Rolex and other
key brand projects through to FY28

·     Strong focus on cost control to generate leverage over fixed costs
will drive profitability improvements

·     In line with our disciplined approach to capital allocation and
given the pipeline of high returning opportunities in the UK and US, the Group
intends to reallocate investment from the European market into these higher
returning regions over the period of the LRP.  We are in negotiations with
our brand partners for the transfer of our existing European mono-brand
boutiques.  The additional growth from Rolex CPO and Roberto Coin Inc. is
expected to offset the reduction from European sales within the life of the
LRP

 

Outlook for FY25

 

·     Following the more challenging trading conditions of FY24, we are
cautiously optimistic about trading in  FY25.  The industry as a whole is
being more conservative on production given the current volatility in the
market, which we believe is a responsible approach to the long-term stability
of the luxury watch market

·     FY25 guidance reflects current visibility of supply from key
brands and confirmed showroom refurbishments, openings and closures, and
excludes uncommitted capital projects and acquisitions

·     FY25 guidance includes the annualisation of the Ernest Jones
acquisition, and Roberto Coin Inc. from 9 May 2024

 

The Group provides the following FY25 guidance on an organic pre-IFRS 16
basis, assuming a £/$1.26 exchange rate:

 

 o  Revenue:                     £1.67 - £1.73 billion, growth of 9% - 12% at constant currency
 o  Adjusted EBIT margin %:      +0.2% to +0.6% expansion from FY24
 o  Total finance costs:         c.£13 million, reflecting additional financing for Roberto Coin Inc.
                                 acquisition
 o  Underlying tax rate:         28% - 30%
 o  Capex:                       £60 - £70 million
 o  Operating cash conversion:   c.70%

The equivalent guidance on an IFRS 16 basis is:

 o  Adjusted EBIT margin %:   +0.2% to +0.6% expansion from FY24
 o  Total finance costs:      £37 - £41 million

·     The Group is exposed to movements in the £/$ exchange rate when
translating the results of its US operations into Sterling. The actual average
exchange rate for FY24 was $1.26. FY25 guidance assumes a £/$1.26 exchange
rate, with a five cent move resulting in an adjustment of c.£30 million to
full year Group revenue and c.£4 million on full year Adjusted EBIT, on a
pre-IFRS 16 basis

 

·     The Group has an exciting pipeline of new showroom projects
planned in FY25:

o  European flagship Rolex boutique on Old Bond Street, London

o  New Audemars Piguet Townhouse, operated as a joint venture, Manchester

o  New Mappin & Webb luxury jewellery boutique, Manchester

o  New Mappin & Webb, Edinburgh

o  New Watches of Switzerland Ross Park, Pittsburgh

o  Relocation and addition of Rolex to Watches of Switzerland Legacy West,
Plano, Texas

o  Relocation/expansion of Mayors Tampa, Mayors St Johns and Mayors Sarasota,
Florida

o  Expansions of Betteridge Greenwich, including enhanced Patek Philippe
space and Betteridge Vail, Colorado

o  Conversion of Mayors multi-brand Lenox, Atlanta into a Rolex mono-brand
boutique

 

·     The Group plans to announce FY24 results on 27 June 2024

 

Q4 FY24 Revenue performance by geography
 
                  Q4 FY24         Q4 FY23         Q4 FY24 vs Q4 FY23
                  13 weeks to     13 weeks to     Reported

                  28 April 2024   30 April 2023   YoY %       Constant currency YoY %

 (£ million)

 UK & Europe      190             198             -4%         -4%
 US               190             173             +10%        +14%
 Group Revenue    380             371             +3%         +4%

 
FY24 Revenue performance by geography
 
                  FY24            FY23            FY24 vs FY23
                  52 weeks to     52 weeks to     Reported  Constant currency YoY %

                  28 April 2024   30 April 2023    YoY %

 (£ million)

 UK & Europe      846             890             -5%       -5%
 US               692             653             +6%       +11%
 Group Revenue    1,538           1,543           -%        +2%

 
Q4 FY24 revenue performance by category
 
                    Q4 FY24        Q4  FY23        Q4 FY24 v Q4 FY23
                   13 weeks to     13 weeks to     Reported

                   28 April 2024   30 April 2023   YoY %      Constant currency

 (£million)                                                   YoY%
 Luxury watches    338             329             +3%

                                                              +5%
 Luxury jewellery  22              22              -1%        -%
 Services/other    20              20              -%         +1%
 Group Revenue     380             371             +3%        +4%

 
FY24 revenue performance by category
 
                    FY24            FY23            FY24 v FY23
                   52 weeks to     52 weeks to     Reported

                   28 April 2024   30 April 2023   YoY %     Constant currency

 (£million)                                                  YoY%
 Luxury watches    1,345           1,336           +1%

                                                             +3%
 Luxury jewellery  102             119             -14%      -13%
 Services/other    91              88              +4%       +5%
 Group Revenue     1,538           1,543           -%        +2%

 

Notes

The financial information contained herein is unaudited

Growth rates are calculated on unrounded numbers

 

( 1 ) $10 million is deferred and contingent on the future profitability of
the business, subject to working capital adjustments

( 2 ) Ecommerce revenue are sales which are transacted online

( 3 ) Adjusted EBIT is defined as operating profit before exceptional items
and IFRS 16 impact

 

 

 

 

Conference call

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

 

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

Dial-in (Toll-Free):                +44 800 358 1035

Participant access code:     209268

 
Contacts

The Watches of Switzerland Group

Anders Romberg, CFO
 
              +44 (0) 207 317 4600

Caroline Browne, Group Finance & Investor Relations Director
                              +44 (0) 116 281 7420

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

 

Headland

Lucy Legh / Rob Walker / Joanna Clark
 
              +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 the UK, US and Europe 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 28 April 2024, the Watches of Switzerland Group had 223 showrooms across
the UK, US and Europe including 99 dedicated mono-brand boutiques in
partnership with Rolex, OMEGA, TAG Heuer, Breitling, TUDOR, Audemars Piguet,
Grand Seiko, Hublot, 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.

 

www.thewosgroupplc.com (http://www.thewosgroupplc.com)

 

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, losses 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
announcement.

 

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 and,
except as required by law or regulation, the Company undertakes no obligation
to update these forward-looking statements.  No statement in this
announcement should be construed as a profit forecast or profit estimate.

 

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 as
detailed above.

 

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