- Sales and profits up even as tourism and airport visits remain low
- Full-year sales outlook increased
This year was certainly the time to get a watch for many cash-rich consumers, judging by Watches of Switzerland’s (WOSG) half-year results. One of London's best signifiers of luxury spending, the company said sales surged by almost 45 per cent on last year in the 26 weeks to 31 October. Last year also saw a relatively strong half-year period despite the pandemic.
This recent strong performance was driven by buyers spending more and greater numbers of sales through both online platforms and reopened shops in the UK and US. Investors have acted the same way with Watches of Switzerland's shares, bidding it up more than double year-to-date.
The company had already raised its half-year adjusted cash profit guidance to £81m-£83m, and hit the top end of this, compared with £52m last year. Guidance for the full-year is for sales of £1.15bn-£1.2bn, compared with just over £900m last year.
Chief executive Brian Duffy said UK watch sales were driven by a “thriving domestic clientele”, with strong growth despite “negligible tourist [sales] and much-reduced airport business”. Sales were more than 30 per cent higher than two years ago, when tourists and airport visitors contributed a third of purchases.
Looking ahead, the company said it would add more US shops, so capital spending forecasts have now climbed by a net £5m to £45m-£50m for the full year. In these results, this figure jumped from £9m last year to £19m this time. Acquisitions also accounted for £9m in spending, compared with just £100,000 year on year.
Massive increases in spending on Rolex Submariners and Cartier Tanks is perhaps a sign for some that spending is overheating and that the economy is headed for a choppy period. Watches of Switzerland’s valuation of 36 times consensus forward earnings – ahead of LVMH Moët Hennessy Louis Vuitton (Fra:MC) on 30 times and Burberry (BRBY) on 20 times – shows it is valued like the good times will continue on indefinitely. We’re not so sure. Hold.
Last IC View: Hold, 839p, 8 Jul 2021
| WATCHES OF SWITZERLAND (WOSG) | ||||
| ORD PRICE: | 1,487p | MARKET VALUE: | £3.6bn | |
| TOUCH: | 1,486-1,492p | 12-MONTH HIGH: | 498p | LOW: 1,568p |
| DIVIDEND YIELD: | na | PE RATIO: | 48 | |
| NET ASSET VALUE: | 129p* | NET DEBT: | 90% | |
| 26 weeks to 31 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2021 | 414 | 36.2 | 12.0 | nil |
| 2022 | 586 | 64.7 | 22 | nil |
| % change | +42 | +79 | +80 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £156m, or 65p a share | ||||
