- Sales and profits up even though tourism and airport visits remain weak
- Full-year sales outlook has increased
This year was definitely the time to buy a watch for many cash-rich consumers, judging by Watches from Switzerland (WOSG) half-year results. One of the best indicators of luxury spending in London, the company said sales rose almost 45% from a year ago in the 26 weeks leading up to October 31. The past year also saw a relatively strong semester despite the pandemic.
This recent strong performance is due to the fact that shoppers have made more and more sales through online platforms and reopened stores in the UK and US. Investors have done the same with Watches of Switzerland shares, offering more than double since the start of the year.
The company had previously raised its forecast for half-yearly adjusted cash profit to £ 81million-£ 83million, and reached the peak of that figure, from £ 52million last year. Forecasts for the full year call for sales of £ 1.15 to £ 1.2bn, compared to just over £ 900m last year.
Managing Director Brian Duffy said UK watch sales were driven by a “thriving domestic customer base”, with strong growth despite “negligible tourist numbers [sales] and very reduced airport activity â€. Sales are up more than 30 percent from two years ago, when tourists and airport visitors made up one-third of purchases.
Looking ahead, the company has said it will add more stores in the US, so forecast capital spending has now increased from £ 5million to £ 45-50million for the whole year. In those results, that figure has dropped from £ 9million last year to £ 19million this time around. The acquisitions also accounted for £ 9million in expenditure, compared to just £ 100,000 over one year.
The massive increase in spending on Rolex Submariners and Cartier Tanks may be a sign to some that spending is overheating and the economy is heading into a turbulent period. Watches for Switzerland’s valuation at 36 times consensus forecast earnings – before LVMH Moët Hennessy Louis Vuitton (Fra: MC) 30 times and Burberry (BRBY) over 20 times – shows it is rated as the good times will continue indefinitely. We’re not so sure. Hold on.
Last seen IC: pending, 839p, July 8, 2021
| SWISS WATCHES (WOSG) | ||||
| ORDER PRICE: | 1,487 p | MARKET VALUE: | £ 3.6 billion | |
| TO TOUCH: | 1 486-1 492p | UP TO 12 MONTHS: | 498p | LOW: 1,568p |
| DIVIDEND RETURN: | n / A | P / E RATIO: | 48 | |
| NET ASSET VALUE: | 129p * | NET DEBT: | 90% | |
| 26 weeks to October 31 | Turnover (£ m) | Profit before tax (£ m) | Earnings per share (p) | Dividend per share (p) |
| 2021 | 414 | 36.2 | 12.0 | nothing |
| 2022 | 586 | 64.7 | 22 | nothing |
| % cash | +42 | +79 | +80 | – |
| Ex-div: | n / A | |||
| Payment: | n / A | |||
| * Includes intangible assets of £ 156million, or 65p per share | ||||
