The Watches of Switzerland Group has shared an update on its financial performance for the third quarter and the first nine months of the fiscal year. The figures highlight the challenges faced by the luxury watches and jewellery retailer. In Q3, the group’s revenue declined by 3% to £397 million, and for the entire nine-month period, revenue fell by 1% to £1.158 billion. However, when looking at revenue on a constant currency basis, there was a 1% increase for the nine-month period.
As previously announced in January, the company encountered tougher trading conditions during the holiday season, particularly in the UK, as there was a slowdown in demand for discretionary luxury purchases. Despite this, demand for key brands, especially those on the Registration of Interest lists, remained strong.
Sales of luxury watches in Q3 rose by 1% on a constant currency basis to £336 million, accounting for 85% of revenue. However, luxury jewellery sales experienced a significant decline of 16% on a constant currency basis, amounting to £34 million. The growth in luxury branded jewellery was offset by weaker performance in non-branded jewellery. E-commerce revenue also saw a decrease of 15% compared to the previous year, which was attributed to the product mix available through this channel and the performance of the UK market. On a positive note, pre-owned sales continued to show positive momentum.
In terms of regional performance, the US saw a growth of 8% on a constant currency basis and 3% reported, reaching £175 million in Q3. For the nine-month period, US revenue increased by 10% on a constant currency basis and 5% reported, totaling £502 million. The strong sales in the US were driven by sustained growth and client demand, as well as gaining market share in the fragmented luxury watch market.
However, the UK and Europe experienced a decline in revenue of 7% in Q3, amounting to £222 million, and for the nine-month period, revenue decreased by 5% to £656 million. The company observed unusually high levels of promotional activity in non-branded jewellery, as consumers chose to allocate their discretionary spending to other categories such as fashion, beauty, hospitality, and travel. Nevertheless, Watches of Switzerland continued to gain market share in the luxury watch industry due to its unique offerings. The UK performance was mainly driven by domestic clientele, as tourist spending remained low due to the absence of VAT-free shopping.
Watches of Switzerland confirmed its guidance, provided in January, of 2-3% constant currency revenue growth for the entire fiscal year. This guidance takes into account the visibility of supply from key brands, confirmed showroom refurbishments, openings, and closures. It excludes uncommitted capital projects and acquisitions. The company expects the trading conditions experienced in Q3 in the UK and US to persist for the remainder of the fiscal year. The guidance also includes the opening of the new Watches of Switzerland multi-brand showroom at One Vanderbilt, New York in March.
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