Watches of Switzerland profits rise as Covid-19 boosts online demand

Watches of Switzerland Brian Duffy
Watches of Switzerland said its stores were only able to trade for 59 per cent of their total hours during the first half
// Watches of Switzerland half-year profits increase due to online shopping
// The retailer saw a 26.5% rise in adjusted EBITDA to £52.2m in the 26 weeks to October 25
// It recorded a profit of £36.2m compared to a £9m loss during the first half of last year

Watches of Switzerland has reported a rise in its half-year profits after online demand increased during the Covid-19 crisis.

The luxury watch retailer posted a 26.5 per cent uplift in adjusted EBITDA to £52.2 million in the 26 weeks to October 25.

On a statutory pre-tax basis, the retailer recorded a profit of £36.2 million compared to a £9 million loss during the first half of last year.

READ MORE: Watches of Switzerland hires Hilton hotel veteran as new chairman

Total sales dropped 2.6 per cent on a constant currency basis to £428.7 million thanks to forced lockdowns and other restrictions on non-essential retailers.

Watches of Switzerland said its stores were only able to trade for 59 per cent of their total hours during the first half.

However, online sales rose 65.4 per cent during the six-month period to offset some of the sales lost through its store portfolio.

Sales in the UK market were down 7.4 per cent during the period due to a drop in tourist numbers affecting footfall.

In the US, revenues rose 11 per cent and was boosted by the acquisition of pre-owned watch business, Analog Shift.

Meanwhile, Watches of Switzerland hailed “strong trading” during its second quarter, when revenues rose 21.5 per cent in constant currency terms, and said its third quarter had gotten off to a “stronger than anticipated start”.

On a constant currency basis, group sales were up 11.9 per cent in the seven weeks to December 13, with the UK registering a 7.7 per cent uptick and the US growing 22.7 per cent.

Watches of Switzerland now expects full-year revenues to come in between £900 million and £925 million, compared to previous guidance of £880 million to £910 million.

EBITDA margin is expected to increase between 1.5 per cent and two per cent compared to 2019/20.

It had previously forecast an increase in the region of one per cent to 1.5 per cent.

Watches of Switzerland now plans to repay furlough support received from the government.

“Despite significant headwinds throughout the period, we achieved a good sales performance with domestic customers offsetting lower tourist and airport sales in the UK, and elevated momentum in the US,” chief executive Brian Duffy said.

“As a result of our stronger than anticipated first half performance and positive trading in the first part of Q3, we have revised our full year guidance upwards.

“Our guidance assumes some further negative trading impact from potential lockdown measures in January and February 2021.

“We have also taken into account the removal of tax-free shopping in the UK from January 1, 2021.

“We believe that the UK Government has misjudged the impact of removing tax-free shopping for tourists and we will continue to support all efforts to have this changed.”

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