9th Nov 2022 12:21
(Alliance News) - There were barely any signs of a cost of living hit for Watches of Switzerland Group PLC, with the market for luxury jewellery withstanding inflationary pressure.
The Rolex watch seller has also seen its market share increase and said demand for its products "continues to exceed supply".
"This trading update from Watches of Switzerland demonstrates that the impact from rising inflation and low consumer confidence is having little impact on the luxury watch and jewellery market," Edison analyst Russell Pointon commented.
The FTSE 250 constituent upped its annual guidance. It said revenue for the year to April 30 is expected to land in a GBP1.50 to GBP1.55 billion range, ahead of previous guidance of GBP1.45 billion to GBP1.50 billion.
"The unique supply/demand dynamics of the luxury watches industry has so far mitigated any potential impact from the wider macroeconomic situation. However, going forward investors will keep a close eye on whether the group will be able to meet its new FY23 guidance, updated to reflect moves in exchange rates, to determine whether the group and indeed the wider luxury watches market will be completely unscathed by the economic challenges," Pointon added.
In the first half of financial 2023, Watches of Switzerland's revenue increased 31% year-on-year to GBP765 million from GBP586 million.
Shares in the company were 0.9% lower at 907.25 pence each in London on Wednesday afternoon. The stock has fallen 36% since the end of last year.
Shore said: "The shares have declined [around] 40% since the start of the year, and we believe the valuation is relatively undemanding given the potential growth trajectory in the fragmented US and EU markets. Demand for luxury watches continues to outstrip supply. In our view, this is a management team executing its strategy well and adapting to dynamic market conditions."
Shore Capital Markets expected Watches to report revenue of GBP1.52 billion, close to the middle of the company's guidance range. It rates Watches at 'buy'.
By Eric Cunha; [email protected]
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