Watches of Switzerland ends year on a high, US and UK performances strong

Group enjoyed “robust” UK trading together with an “outstanding” US performance for both the 14 weeks and 52 weeks ending 2 May.

Let’s start with the final quarter. Group revenue leapt 81.8% at a constant currency (+76% reported) to £218.2 million compared to a year ago and was also up 24.7% in constant currency on Q4 FY19.

UK revenue rose 49.3% to £126.2 million on a year ago and was only down 2.7% relative to Q4 FY19. And, of course, given the extended lockdowns, e-commerce was the standout performer, “continuing strongly”, up 218.1%.

It said UK stores generated strong growth on reopening, having been closed since 26 December.That was boosted by further development of the monobrand channel with three new boutiques opened.

If you thought that was good, the US performance was, by comparison, outstanding. Revenue rocketed 151.4% currency-neutral (up 133.6% reported) to £92 million vs Q4 FY20 and up 95.9% in constant currency relative to Q4 FY19.

Store-wise, Mayors in Florida and Georgia and Watches of Switzerland in New York “continue to experience strong momentum” while Las Vegas saw “improving trends, reflecting the easing of restrictions in this market”.

It added that eight recently-opened monobrand boutiques in five locations are “performing well” while initial results from its recent US e-commerce launch “are according to plan and encouraging”.

WoS added that after the strong finish to the year, it expects adjusted EBITDA to hit the upper end of guidance.

And that strong Q4 finish further boosted 12-month figures. Group revenuer the year rose 13.3% currency neutral (+11.7% reported) to £905.1 million on a year earlier and lifted 17.9% in constant currency relative to FY19.

UK sales were in line with guidance despite the extended lockdown in Q4 (16 weeks vs group's assumption of six weeks) and adverse FX movements.

Despite that, UK year-end revenues were “robust”, up 3.6% vs FY20 despite store closures for around 26 weeks of the year (compared to six weeks in FY20) and significantly reduced tourism and airport business (+3.1% relative to FY19). Sales of luxury watches rose 16% relative to FY20 to represent 87.1% of group revenue (FY20: 83.9%)

And, of course, there was a "significant step-up” achieved in group e-commerce with sales up 120.5% relative to last year. 

US revenue rose 38.5% vs FY20 and 64.8% vs FY19 (both in constant currency) where investments and initiatives “exceeded expectations and drove broad-based growth, including encouraging early results from the relaunch of luxury jewellery in Mayors”.

For fiscal 2021, WoS expects unaudited adjusted EBITDA to range from £104 million to £107 million, up from £78.1 million a year ago, implying a margin of between 11.5% and 11.8% (FY20: 9.6%). Net debt at year end was £43.9 million down from £129.7 million a year ago, relative to its guidance range of £60 million-£80 million.

So what can we expect for fiscal year 2022? For starters, the group “doesn’t assume any supply disruption or any national lockdowns in any of its markets with a gradual recovery in footfall anticipated”.  

Given that its also doesn’t expect the return of tourism and airport business to pre-pandemic levels during the year, the group sees revenue ranging from £1.05 billion to £1.1 billion. Meanwhile EBITDA and adjusted EBITDA should be flat to  up0.5% vs last year.

There’s also an “exciting pipeline of store projects" planned, mostly in the US, but including a new Watches of Switzerland store in London’s Battersea.