The UK-based seller of Rolex, Omega and Breitling watches has become the latest luxury brand to fall victim to waning profits following an unimpressive holiday season.
Watches of Switzerland on Thursday said that it had experienced a ‘volatile trading performance in the run-up to and beyond Christmas‘, causing the group’s shares to tumble more than 30 percent.
CEO Brian Duffy blamed the dip on customers ‘allocating spending to other categories, such as fashion, beauty, hospitality and travel’.
That said, sellers like Richemont, a Swiss group that shill brands like Cartier and Jaeger-LeCoultre, remained unaffected – recording an 11 percent rise after it reported an 8 percent sale increase during the three months through December.
Nonetheless, Duffy assured analyst Thursday his $1.1billion firm – Britain’s biggest retailer of Rolex, OMEGA, Cartier, TAG Heuer and Breitling – would soon devise strategies to adapt.
The main UK seller of Rolex has become the latest luxury brand to sound the alarm on waning profits – following an unimpressive holiday season. Pictured: Tom Hardy wearing a Rolex Explorer II ref. 216570 with a white dial
Meanwhile, a Swiss group that sell brands like Cartier and Jaeger-LeCoultre, Richemont, remained unaffected – recording an 11 percent share rise after an 8 percent sales rise after December. Pictured: Jennifer Aniston wearing a Cartier bracelet in 2009
‘We’re sorry we didn’t see it coming more than we have done, we’re adjusting to it, we’ve recalibrated now [and] we’re on for our long-[term] plan,’ Duffy, 69, said.
Admitting the year-end results were ‘disappointing’, he proceeded to claim the company had received a different mix of Rolex watches from the Swiss manufacturer than normal, reducing average sales prices.
He explained how Rolex – a privately owned entity that generates more than $10billion in revenue in sales – sent the company predominantly watches made of steel, rather than the more expensive combination of steel and gold.
‘They produced more steel and less of the precious metal and that was a surprise to us and fairly late on in the period,’ the head exec said.
Duffy claimed that he and others ‘did not anticipate a drop in our average selling price,’ nor ‘that product mix change.’
A change in the overall number of watches received from Rolex – the seller’s most desired brand – could also have caused the profit dip, Duffy said,
He theorized the shift could serve as proof of a more conservative approach from watchmakers amid decreased buyer confidence, as the sector has reported slowing demand in both the US and Europe, where rising prices have prompted people to reduce spending,
‘The festive period was particularly volatile this year for the luxury sector,’ explained Duffy, before specifically blaming U.K. shoppers and their eschewing of expensive trinkets during the holidays as opposed to their American counterparts.
He said Britain had been its ‘most challenged’ market during the Christmas trading season, affecting not only sales of luxury watches, but non-branded jewelry.
Sales in the United States, he said, had grown at a “double-digit” rate in the weeks before and after Christmas, as the UK purveyor continues to expand stateside.
While disappointed with the decline in spending, Duffy said he “remains confident in the markets in which we operate, our model and the delivery of our long-range plan”.
‘We are encouraged by our market share gains in both the U.S. and U.K.,’ he said, as Watches of Switzerland remains the UK’s biggest seller of high-end brands, operating 211 showrooms across Britain, the US, and the rest of Europe.
‘We remain confident in the markets in which we operate, our model and the delivery of our Long Range Plan announced to the market in November 2023.’
The setback comes after the company’s shares dropped last August to levels not seen since December 2020 – during the midst of the pandemic – sparking concerns about the retailer’s continued relevance.
The drop – which, similar to the reaction seen Thursday, included a 27 percent dip in a single day – also fueled rumors about the firm’s relationship with Rolex, which just days before acquired rival watchmaker Bucherer.
The drop has served to fuel rumors about the seller’s relationship with Swiss-based Rolex, amid fears it is selling more timepieces directly to customers as opposed to licensed retailers
The acquisition, at the time, sparked fears Rolex could soon begin sell more of its timepieces directly to customers – a dynamic that could cut into Watches of Switzerland’s long-held consumer-base.
Analysts at Peel Hunt on Thursday said the supposed shift in spending ‘begged the question’ of whether the relationship with Rolex was to blame, in comments The Financial Times.
‘Either way, the change in product mix was extremely damaging and will likely continue to be so,’ the experts said.
Duffy, meanwhile, told onlookers to expect sales in UK to be down slightly due to the recent advent, but vowed that markets in the US are going strong.
A strong performance in the US – as well as China – helped Richemont offset a decline in European sales to an overall increase of eight percent for the three months through December.
Sales of Richemont’s high-end brands – which include not only Cartier but Buccellati and Van Cleef & Arpels as well – rose 12 percent in the last three months of 2023 as well.
That said, a London-listed retailer or luxury goods in Burberry, was not so lucky, as American tourists who used to buy during their excursions more and more choose to buy from home.
A strong performance in the US and helped Richemont – the main seller of Cartier (bracelet seen here) offset a decline in European sales to an overall increase of eight percent for the last three months of 2023
That said, a London-listed retailer or luxury goods in Burberry, was not so lucky, as American tourists who used to buy during their excursions more and more choose to buy from home
Last week, the trench-coat maker said it had too fallen victim to waning demand, anticipating full-year profit dip of roughly 20 percent.
Others reporting reduced interest include LVMH – the owners of brands such as Christian Dior, Fendi and Givenchy – and Gucci and Balenciaga’s parent Kering.
All reported late last year that sales interest was fizzling, and could be issuing similar statements in the coming months as the full financial implications of the holiday season come to fruition.
Putting an exclamation mark on the surfacing phenomenon is the fact that luxury fashion purchases in November decreased by 9.6 percent year over year.
Similar statistics could be seen in coming weeks, when earnings reports for the fourth and final quarter for the 2023 fiscal year are unveiled.
Still, Duffy on Thursday said of his 100-year-old our model is very well positioned competitively, we feel really good about the future.’