14th Dec 2022 15:50
(Alliance News) - Watches of Switzerland Group PLC on Wednesday reported double-digit rises in both interim profit and revenue, as customers continue to "splash the cash" on luxury goods.
Shares in the Leicester, England-based luxury watch retailer were down 4.6% to 914.50 pence each in London on Wednesday afternoon.
In the six months that ended on October 30, Watches of Switzerland reported revenue of GBP765 million, up 31% from GBP586 million the previous year. The company noted continued "strong demand for luxury watches and jewellery, with growth driven by increases in average selling price and volume".
Particularly in the US, revenue during the period surged by 86% to GBP311 million from GBP167 million.
Total pretax profit rose 28% to GBP83 million from GBP65 million. Operating profit also increased by 28% to GBP93 million from GBP72 million the year before.
Adjusted earnings before interest, tax, depreciation and amortisation amounted to GBP104 million, up 26% from GBP83 million.
Net debt stood at GBP26 million as of October 30, compared to net cash of GBP30 million on October 31 a year prior.
"The market focus remains short term," AJ Bell's Russ Mould said about the share price reaction, "and investors have given the thumbs-down to the results. There's been a slight dip in margins and a big drop in cash flow. The latter can partly be explained by having a big working capital outflow versus an inflow a year earlier."
Looking ahead, Watches of Switzerland noted that trading in the holiday period so far has been in-line with its expectations.
As a result, Watches of Switzerland kept its full-year guidance unchanged. This calls for revenue between GBP1.50 billion and GBP1.55 billion.
"While some people may only be able to afford small Christmas presents this year, there is also a large group of individuals who still have the means to splash the cash. That might explain why demand remains very strong for luxury goods such as Rolex watches," said Mould.
"Many people are on waiting lists for watches, such is the demand, and a lot of these won't even put the product on their wrist once obtained. It's about prestige – either displaying the watch in a cabinet at home or storing it safely in the hope that it appreciates in value. Often shelling out tens of thousands of pounds, watches are serious purchases and history suggests they can significantly rise in value."
By Sophie Rose, Alliance News reporter
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