Watches of Switzerland today set out a five-year plan that sees it entering the EU market, as it reported full-year sales of more than £905m and fast profits growth.
The retailer says it stepped up its multichannel approach to retailing as it adapted quickly to the conditions caused by Covid-19 disruption, in a year when luxury watch sales grew by 16% and accounted for 87.1% of group revenue. Now it plans to strengthen its leadership of the UK luxury watch market, lead the US market and move into the EU market for the first time.
The long-term plan was set out as the retailer today reported sales of £905.1m in the 53 weeks to May 2. That’s 11.7% up from £810.5m a year earlier. Pre-tax profits of £63.7m were up from £1.5m a year earlier.
Looking ahead, it now expects revenues to pass the £1bn annual milestone in its current financial year, while it expects top-line earnings to be flat on the previous year.
Watches of Switzerland chief executive Brian Duffy says: “Since 2014 we have delivered a sustained track record of strong, profitable growth, consolidating our position as theUK’s leading luxury watch retailer. We have further developed our long-standing partnerships with the most prestigious luxury watch brands, invested in our stores and in leading edge systems and technology while further enhancing our bold, impactful and digital-led marketing approach. Through focused investment we have built a modern, digitally advanced multi-channel retailer and have achieved outstanding momentum in the US since our entry into the market in late 2017.
“Looking ahead, we are excited to capitalise on the significant opportunity to accelerate our strategy. The UK luxury watch market continues to grow, and we continue to advance our leading position. In addition, we plan to achieve growth through further geographical diversification, becoming the clear leader in the US market, and establishing a presence in the EU with the targeted roll-out of our proven model.”
But he also sounded a note of caution, as he said: “Our growth projections reflect our best estimate of future supply based on our past experience of investment and expansion. The ability to grow in our category is partly determined by restricted supply of key brands and is therefore not guaranteed.”
The Watches of Switzerland customer, says Duffy, has accumulated disposable wealth and now wants to buy luxury watches. During the last year it has enabled shoppers to do that online and across sales channels, with its shops often closed. Ecommerce sales grew by 120.5% over the year, growing particularly strongly in the UK. At the same time, click and collect sales grew strongly over 46 weeks of the year, and trading was strong over the 26 weeks that stores were open.
That growth was supported by the use of tools including personal appointments, virtual selling, and improvements to its customer relationship management. The retailer also expanded its national service centre, opened more than 18 stores – mostly mono-brand watch stores – of which 10 were in the UK, and bought vintage and pre-owned watch company Analog Shift.
The retailer has paid back its furlough money and coronavirus loans to government, and also paid staff their full salaries during the year. It has launched a Watches of Switzerland Group Foundation, with £1.5m already committed and a further £1.5m planned for the next financial year.
Duffy says: “Trading has remained strong in both the UK and the US since the year-end. Our customer has accumulated disposable wealth and our category is an attractive option. Our growth projections reflect our best estimate of future supply based on our past experience of investment and expansion.
“The momentum we bring into FY22 underpins our confidence for the financial year ahead. Sustained capital investment will continue to support our growth plans in the UK. Our success in the US proves our model works in this market and we will continue to invest in our stores and new projects, whilst pursuing selective acquisitions at attractive returns in our ambition to become the clear leader in the market.”
Long-term expansion strategy
The luxury watch and jewellery retailer, ranked Top500 in RXUK Top500 research, says that it will be targeting a $21bn retail market for luxury watches in the five years to 2026. It says that across its markets, UK shoppers spend most per head on luxury watches – and this is down to retail investment rather than customer behaviour, giving it an opportunity to take its model to other markets.
In the US, it says, it is operating in a market that is both fragmented and underinvested, and where shoppers spend about $4.5bn a year, in contrast to the £1.3bn of the UK market. It now plans to open new stores, while strengthening its ecommerce channel and scaling its digital market. In time, it says, the ecommerce channel “will become as important to our US business as in the UK”.
And it says the EU market is falling behind its potential growth. It plans to move into the market through acquisitions, through opening mono-brand watch boutiques, and investing in ecommerce and in travel retail. By 2026, says Watches of Switzerland, it is targeting between 5% and 8% of group revenue. At the same time it expects 90% of sales to come from luxury watches.