Watches of Switzerland suffers UK droop as Britons reduce on luxurious

Watches of Switzerland Group’s sales fell after ‘significant price increases’ put off hard-pressed British shoppers as ‘reduced consumer confidence’ continues to hit discretionary spending

The luxury retailer’s UK and Europe sales were down 5 per cent in the 52 weeks ended 28 April to £846million, despite market share gains, which it said reflected ‘macroeconomic conditions in the UK’.

WOSG on Thursday also blamed a ‘minimal return of tourist spending due to lack of VAT-free shopping’ in the UK, where ecommerce revenues also fell 11 per cent on last year.

Britons call time on luxury spending as consumer pressure continues to weigh on demand 

The group said it was ‘cautiously optimistic’ about trading in new fiscal year 2025 after reporting a 40 per cent drop in its statutory pre-tax profit to £92million.

US constant currency revenue growth of 11 per cent to £692million was not enough to offset a challenging year for the luxury retailer.

Profitability was hit by a ‘lack of leverage and the headwinds of interest free credit costs’, boss Brian Duffy said, while UK demand continued to lag its pandemic-era strength.

Duffy said: ‘The UK luxury watch market is going through a period of normalisation following the COVID boom, where consumers had more disposal income to spend on watches and jewellery.

‘High inflation and interest rates resulted in increased cost-of-living for the UK consumer and this coupled with significant price increases, mainly due to the strength of the Swiss Franc, from luxury watch brands meant that the aspirational customer was more squeezed and inclined to defer purchases.

‘The UK market is now almost entirely domestic, following the withdrawal of VAT free shopping for tourists following Brexit, resulting in very low levels of overseas shoppers.’

Nevertheless, WOSG shares were up by 9.3 per cent at 436.6p by midmorning on Thursday, parring back 2024 losses to around 35 per cent.

WOSG shares’ 2024 decline was driven by a January profit warning when the firm forecast ‘no recovery’ in demand for the year. 

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: ‘While some of the problems are outside the group’s control, a tighter grip on proposition and pricing is something the market’s looking for.’

WOSG said the UK market is now ‘starting to show signs of stabilisation’ and the company predicts that pressure on consumer spending will ease next year.

It maintained performance expectations for 2025.

WOSG said: ‘The industry as a whole is being more conservative on production, which we believe is a responsible approach to the long-term stability of the luxury watch market.

‘FY25 guidance reflects current visibility of supply from key brands and confirmed showroom refurbishments, openings and closures, and excludes uncommitted capital projects and acquisitions.’

WOSG expects to post 2025 revenues of roughly £1.7billion next year, reflecting constant currency growth of 9 to 12 per cent, and an earnings margin expansion of 0.2 to 0.6 percentage points.

Duffy added: ‘I am proud of the performance that our team delivered this year in what was undoubtedly a more challenging market.

‘We cemented our position as a leading international luxury watch and jewellery retailer and delivered further market share gains in both the UK and US, driven by our proven, differentiated business model.