Watches of Switzerland first quarter sales dipped as the tourist tax hit UK sales.
UK and Europe sales fell 8% to £219m as CEO Brian Duffy told the Evening Standard that sales at showrooms in Heathrow and Gatwick were still only “40% to 50% of what it was”.
Duffy told City Am that the end of VAT-free shopping for tourists was “the biggest single frustration” for the UK retail sector.
“I was in Italy this weekend and the amount of American tourists that were shopping was very visible and the UK is not getting anywhere near its fair share of that,” he said. “The UK is missing out…it’s an opportunity for growth.”
The government scrapped the VAT refund for tourists in 2021. A raft of UK retailers including Harrods, Selfridges, and Harvey Nichols have lamented the change, which has hampered sales.
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Watches of Switzerland: US strong, UK suffers
Watches of Switzerland group sales dropped 2% to £382m in the quarter to 30 July compared to £391m made in the first quarter of 2023.
Despite the sales fall in the UK, the jeweller celebrated strong growth in the US, where revenue jumped 10%.
Across the business, watches – which accounted for 88% of sales – held steady, with revenue down 2% to £336m over the quarter.
However, luxury jewellery sales plunged 15% year on year as it was impacted by consumer sentiment and a repositioning to full price sales in the US.
Online sales fell 2% against strong comparatives the prior year, as a higher proportion of jewellery is sold via the channel.
Watches of Switzerland’s guidance for the year ahead remained unchanged.
Duffy said: “Looking ahead, we expect to return to more normalised growth rates in the balance of the financial year.
“Our full year guidance for another year of strong growth remains unchanged, underpinned by our supply visibility, client ‘Registration of Interest’ lists and strong pipeline of showroom openings, refurbishment and investment, as luxury watch demand continues to outstrip supply.”
The retailer became a Real Living Wage Employer over the period, with all employees receiving a minimum hourly wage of £11.95 in London and £10.90 in the rest of the UK.
Both rates are significantly higher than the government’s national living wage for over 23s, which currently stands at £10.42 per hour.
Duffy said: “Our colleagues are at the heart of our business and are critical to our success. Our teams are passionate and dedicated about the clients they serve and the relationships they have supporting each other internally to give the best client experience.
“We wanted to implement the real living wage to recognise the value of our colleagues across the business and demonstrate our core value of always doing the right thing”.
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