REG - Watches of Switzlnd. - Q2 FY23 Trading Update

Watches of SwitzerlandAnnouncement

09/11/2022 07:00

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RNS Number : 7497F  Watches of Switzerland Group PLC  09 November 2022

9 November 2022

 

 

Watches of Switzerland Group PLC

Q2 FY23 Trading Update

for the 13 weeks (Q2 FY23) and 26 weeks (H1 FY23) to 30 October 2022

 

Strong broad based trading momentum through Q2

Ongoing market share gains in UK and US

FY23 guidance upgraded to reflect benefit of foreign exchange

 

Brian Duffy, Chief Executive Officer, said:

"We are pleased to report another quarter of strong trading driven by broad
based sales growth across our portfolio of world leading partner brands.
Demand remained strong through the quarter and continues to exceed supply,
with client registration lists extending as consumers respond to innovative
new products, impactful marketing and elevated client service.

 

"The first half of the year has been a busy period of new showroom openings -
including five showrooms at the iconic Battersea Power Station in London and
additional mono-brand boutiques across the UK, US and now Europe - together
with showroom refurbishments as we continue to invest to elevate the luxury
experience for our clients.

 

"Our strong H1 performance underpins our full year guidance, which we have
upgraded to reflect the benefit of foreign exchange movements. Looking ahead,
we remain confident in our Long Range Plan objectives, supported by a strong
pipeline of expansionary projects as we continue with our strategy of
investing for growth."

 

H1 FY23 Highlights:

Group revenue £765 million (H1 FY22: £586 million) +23% at constant
currency, +31% at reported rates

·      Luxury watches +31% at reported rates to £667 million,
representing 87% of revenue (H1 FY22: 87%) with growth driven by increases in
average selling price and volume

·      Luxury jewellery +38% at reported rates to £56 million as we
continue to elevate our product offer and distribution

·      Continued strong momentum in the US with revenue of £311 million
(H1 FY22: £167 million), +60% at constant currency, +86% at reported rates
with revenue growth excluding acquisitions +44% at constant currency

·      Strong UK performance driven by domestic clientele, with revenue
of £454 million (H1 FY22: £419 million), +8% vs H1 FY22

·      Opened four mono-brand boutiques in Europe. Early trading in line
with expectations with two further mono-brand boutiques opening in H2 FY23

·      Group ecommerce sales +7% on last year at reported rates

·      H1 FY23 Adjusted EBIT is expected to be £86 million to £88
million (H1 FY22: £67 million, when margins benefitted from £5 million of UK
business rates relief)

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

·      The Watches of Switzerland Group Foundation has now approved
charitable donations of £2.7 million to continue to support disadvantaged
communities in both the UK and US

 

Q2 FY23 Highlights:

Group revenue £374 million (Q2 FY22: £289 million), +21% at constant
currency, +30% at reported rates

·      US revenue of £159 million, +46% at constant currency, +74% at
reported rates

o  Revenue growth excluding acquisitions +30% at constant currency

·      UK revenue of £215 million, +9%

o  Tourist sales remain very low, but there has been consistent performance
improvement at airports throughout the quarter

·      Ongoing investment in showrooms in Q2 with 9 opened in the UK, 5
in the US and 3 in Europe:

o  Five showrooms at the new iconic Battersea Power Station in London, a
Watches of Switzerland showroom featuring a dedicated Rolex area, Cartier
"Espace" and other luxury watch brands; and four mono-brand boutiques in
partnership with OMEGA, Breitling, TAG Heuer and TUDOR

o  Continued rollout of Goldsmiths Luxury concept with the reopening of our
flagship in Meadowhall, Sheffield featuring a large dedicated Rolex room and
Cartier "Espace"; and West Quay, Southampton with large branded spaces for
OMEGA and Breitling

o  Four additional mono-brand boutiques in the UK including two in Canary
Wharf, London and the first TUDOR boutique in Scotland

o  Five US mono-brand boutique openings including TAG Heuer and Breitling
boutiques in Boca Raton, Florida

o  Opened OMEGA and Breitling mono-brand boutiques in Copenhagen, Denmark and
Breitling mono-brand boutique at Westfield Mall of Scandinavia, Sweden

 

Outlook

·      While we continue to monitor the wider macro-economic
environment, we believe that the strength of the luxury watch and jewellery
categories, the unique supply/demand dynamics of luxury watches and client
registration lists, our portfolio of leading brand partnerships, and the
success and agility of our model will continue to support long term
sustainable sales growth. We remain confident in our Long Range Plan
objectives.

 

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

 

·      Guidance is now upgraded to reflect movements in foreign exchange
with H2 projected using a £/$ 1.20 exchange rate. On a constant currency
basis revenue and adjusted EBIT guidance is unchanged. Guidance is on an
organic, pre-IFRS 16 basis and as previously stated, continues to anticipate
the potential for more challenging market conditions in the second half:

 

 o  Revenue:                      £1.50 - £1.55 billion (previous guidance £1.45 - £1.50 billion)
 o  Adjusted EBITDA %:            flat to +0.5% (guidance unchanged)
 o  Depreciation:                 £33 - £35 million (guidance unchanged)
 o  Adjusted EBIT:                £163 - £175 million (previous guidance £157 - £169 million)
 o  Total finance costs:          c£5.5 million (previous guidance c.£4.5 million) reflecting higher interest
                                  rates
 o  Underlying tax rate:          21.5% - 22.0% (guidance unchanged)
 o  Capex:                        £70 - £80 million (guidance unchanged) including new offices in the UK
 o  Year end net cash:            £35 - £45 million (guidance unchanged)

 

The equivalent guidance on an IFRS 16 basis is:

 

 o      Adjusted EBIT:             £178 - £190 million (previous guidance £172 - £184 million)
 o      Depreciation:              £81 - £85 million (previous guidance £79 - £83 million)
 o      Total finance costs:       £21 - £24 million (previous guidance £18 - £21 million)

 

·      The Group is exposed to movements in the £/$ exchange rate when
translating the results of its US operations into Sterling. Guidance for H2
assumes a £/$ 1.20 exchange rate, with a five cent move resulting in an
adjustment of c.£15 million to Group revenue and c.£2 million on Adjusted
EBIT, on a pre-IFRS 16 basis.

 

H1 FY23 Revenue Performance by Geography
                  H1 FY23       H1 FY22       H1 FY23 vs H1 FY22
                  26 weeks to   26 weeks to   Reported YoY %

                  30 Oct 2022   31 Oct 2021                   Constant currency YoY %

 (£m)

 UK & Europe      454           419           8%              8%
 US               311           167           86%             60%
 Group Revenue    765           586           31%             23%

 
Q2 FY23 Revenue Performance by Geography
                  Q2 FY23       Q2 FY22       Q2 FY23 vs Q2 FY22
                  13 weeks to   13 weeks to   Reported YoY %

                  30 Oct 2022   31 Oct 2021                   Constant currency YoY %

 (£m)

 UK & Europe      215           197           9%              9%
 US               159           92            74%             46%
 Group Revenue    374           289           30%             21%

 
Q2 and H1 FY23 Revenue Performance by Category
                   Q2                                          H1
                   13 weeks to   13 weeks to   Reported YoY %  26 weeks to   26 weeks to   Reported YoY %

                   30 Oct 2022   31 Oct 2021                   30 Oct 2022   31 Oct 2021

 (£m)

 Luxury watches    325           250           30%             667           509           31%
 Luxury jewellery  29            21            40%             56            41            38%
 Other             20            18            10%             42            36            14%
 Group Revenue     374           289           30%             765           586           31%

 

The financial information contained herein is unaudited.

Adjusted EBIT is EBIT before exceptional items shown on a pre-IFRS 16 basis.

Certain financial data within this announcement has been rounded. Growth rates
are calculated on unrounded numbers.

 

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 (UK): 020 3936 2999

Dial-in (all other locations): +44 20 3936 2999

Participant Access Code: 005060

 

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 / Rob Walker / Joanna Clark
 
 
              +44 (0) 20 3805 4822

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

The Group will announce its Interim results for the 26 weeks ended 30 October
2022 on 14 December 2022.

 

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 30 October 2022, the Watches of Switzerland Group had 188 showrooms
across the UK, US and Europe including 74 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.

 

https://www.thewosgroupplc.com (https://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 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
are described in the Annual Report and Accounts 2022 in Risk Management and
Principal Risks and Uncertainties.

 

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