Watches of Switzerland Group plc demonstrated its recent growth via their financial results, announcing notable momentum in the United States market. As outlined in the earnings call by CEO Brian Duffy, the company experienced a significant uptick in domestic sales compared to the previous financial year. Concurrently, international sales took a hit due to the Brexit-impacted removal of tax-free shopping in the UK. Nevertheless, the company has been able to offset any losses by strengthening its focus on domestic affairs.
The first half of the fiscal year showed how the company has faced the challenging economic environment by displaying growth in both the UK and the US markets. The company declared a group revenue increase of 2% at constant currency, while the US reported an even more commendable figure of 11% growth at constant currency.
Watches of Switzerland Group plc's successful navigation amidst adversity has been credited to certain key drivers. These include a substantial net cash position of GBP60 million, acquisitions of luxury showrooms from Ernest Jones, and the introduction of Rolex certified pre-owned watches. Another element of their growth strategy has been the significant expansion in showroom space and a marked focus on e-commerce, a testament to their adaptability to the digital landscape.
However, growth hasn't been without a few roadblocks. Adjusted EBITDA did decline by 8% at constant currency and 10% at reported rates. This is attributable mainly to changes in product mix and costs associated with interest-free credit, leading to net margin reduction. Additionally, Brexit has had a negative impact on international sales due to the removal of tax-free shopping in the UK.
Despite these challenges, the company has elaborated on their strategies for growth. The emphasis has been on showroom expansion and investment in luxury designs to provide an enhanced offering to their customers. The company has also introduced Rolex certified pre-owned watches and expanded into luxury branded jewelry to diversify offerings. In addition to this, a new store in Manchester has been opened.
Looking ahead, Watches of Switzerland Group plc intends to continue investing in showroom expansions and refurbishments, planning substantial capital investments. Expanding into the luxury branded jewelry market is identified as an attractive growth avenue, as well as focusing on e-commerce. With predicted sales and profits to double by the fiscal year 2028, the company is dedicated to sustained growth over the next five years, solidifying its position as a key player in the industry.
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PSFK Earnings Call Podcast: Watches of Switzerland Group plc - WOSG