16th Aug 2022 14:32
(Alliance News) - Watches of Switzerland Group PLC has so far not fallen victim to cost of living pressures or even airport disruption in the Rolex watch seller's travel arm.
There could be some trouble ahead for the luxury watch seller, however, as second-hand prices weaken.
For now, though, the market was focused on the positives. Shares were up 3.2% at 912.07 pence each in London on Tuesday afternoon.
It reported a first quarter revenue climb, defying a cost of living-induced retail malaise.
It said revenue in the first quarter ended July 31 jumped 31% on-year to GBP391 million from GBP297 million.
Watches of Switzerland backed its guidance. It forecasts revenue between GBP1.45 billion and GBP1.50 billion, up from GBP1.24 billion in financial 2022.
Guidance anticipates a "potentially more challenging trading environment in the second half", however.
Analysts at Shore Capital Markets commented: "Demand for luxury watches continues to outstrip supply. In our, this is a management team executing its strategy well and adapting to dynamic market conditions."
Shore rates the firm at 'buy'.
Watches of Switzerland "has a leading presence in Heathrow Airport", it says, with units in terminals two, three, four and five.
All its airport showrooms are opening and traffic is recovering, it said, shaking off the potential of a footfall decline as airports suffer from disruption.
While the update on Tuesday was largely positive, commentators noted a recent decline in the second hand watches market.
Last week, the Financial Times reported prices of second-hand luxury goods have slipped in China.
The FT noted luxury watches portal Watcheco reported that prices of second hand Rolex Submariners have almost halved since March.
"While there is a risk that trend spreads into the primary market where Watches of Switzerland operates, so far there is no evidence of a dip in demand," AJ Bell analyst Danni Hewson commented on Tuesday.
"One of the key attractions for premium watches is that they are seen to be a good investment as editions are limited and there are plenty of people who want to own them. If second-hand prices are falling, however, that dilutes the appeal of luxury watches from an investment perspective. It’s something to keep an eye on, particularly if second-hand prices for luxury watches fall below retail prices. Although reports suggest we're a long way off that happening just yet."
By Eric Cunha; [email protected]
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