Shares in Watches of Switzerland, a leading luxury watch seller, experienced a severe drop of almost a third on Thursday. The company issued a warning that sales would be significantly lower than expected, citing a lack of interest from UK consumers in purchasing expensive items during the festive season.
Watches of Switzerland acknowledged that challenging macro-economic conditions had played a significant role in impacting consumer spending within the luxury retail sector. Moreover, they expressed concern that these difficult circumstances would persist throughout the remainder of their fiscal year.
Renowned for offering prestigious brands such as Rolex, Breitling, and Patek Philippe, Watches of Switzerland now predicts a full-year revenue for 2024 between £1.53 billion ($1.94 billion) and £1.55 billion. This represents a downward revision from their previously estimated range of £1.65 billion to £1.70 billion.
Brian Duffy, the chief executive of Watches of Switzerland, commented on the unpredictable nature of this year’s festive period in the luxury sector. He mentioned that consumers had redirected their spending to other categories such as fashion, beauty, hospitality, and travel.
Reflecting the company’s diminished prospects, shares of Watches of Switzerland experienced a record decline, dropping by 32.3% on Thursday, reaching their lowest point since October 2020. This steep decrease follows a remarkable peak in December 2021 when the luxury sector enjoyed heightened levels of spending during the COVID-19 pandemic. Since then, the shares have incurred a 73% loss.
Additionally, Watches of Switzerland suffered a blow last year when it was revealed that its competitor Bucherer had been acquired by Rolex. This development raised concerns that Bucherer’s timepieces would be sold directly to consumers, posing a potential threat to the market position of Watches of Switzerland.
Despite these setbacks, Watches of Switzerland remains committed to navigating the challenges presented by the current landscape and continuing its reputation for providing luxury timepieces to discerning customers.
Retail Trends and Challenges
According to Russ Mould, the investment director at AJ Bell, recent retail trends indicate a shift in consumer priorities towards experiences like foreign holidays rather than big-ticket purchases. This change in behavior has had a negative impact on Watches of Switzerland, as fewer people are giving the brand the attention it deserves.
The company has been facing challenges for some time now, with sales growth slowing down and the watch market becoming saturated with second-hand timepieces. The increased availability of pre-owned watches has put pressure on prices, further compounding the company’s struggles.
Luxury goods groups across the board are facing similar issues due to softer economic conditions. London-listed Burberry is one such example, as it also recently warned of declining sales.
Richemont’s Revenues Surge
Despite the challenges faced by Watches of Switzerland and other luxury brands, there is some positive news for the industry. Swiss luxury conglomerate Richemont reported a significant increase in revenues during the final quarter of 2023. This growth was primarily driven by high demand for jewelry in China and Japan.
As a result, Richemont’s shares experienced a notable jump, which also had ripple effects on its French peers such as LVMH, Kering, and Hermes International. French stock market index CAC 40 witnessed an increase of 0.8%.
Market Performance
In terms of market performance, Germany’s DAX saw a rise of 0.6%, while London’s FTSE 100 had a more modest gain of just 0.2%. The FTSE 100 was hindered by struggling utilities, which have been negatively affected by higher-than-expected inflation rates.
Despite these fluctuations, there was a bright spot in London with Flutter Entertainment, the betting group that owns FanDuel. Despite news of several punters’ wins, investors remained unfazed and instead focused on the company’s upcoming U.S. listing on the New York Stock Exchange, causing shares to surge by 13%.
