Proactive Investors - For the nine-month period to 28 January 2024, London-listed Rolex merchant Watches Of Switzerland Group PLC (LON:WOSG)’s revenues reached £1.15 billion, marking a 1% increase at constant currency but a 1% decrease at reported rates year-over-year.
The US market showed strong performance with a 5% reported revenue increase to £502 million, though this was offset by a -5% drop in European and UK revenues to £656 million over the past nine months.
“Challenging macroeconomic conditions in the UK impacted consumer spending in the luxury retail sector, impacting luxury watches and particularly non-branded jewellery where we saw unusually high levels of promotional activity,” said the group.
Management said that consumers are allocating discretionary spending to other categories such as fashion, beauty, hospitality and travel.
Furthermore, the lack of VAT-free shopping is hurting tourist spend in the UK, making sales more heavily weighted to domestic customers.
The government scrapped VAT-free tourist shopping in 2020.
However, amid pressure from industry campaigners and the Centre for Economics and Business Research (CEBR), the Treasury has hinted that it may scrap this divisive tourist tax in next month’s budget.
Despite struggling European sales, Watches of Switzerland has reconfirmed its firm-wide full-year revenue guidance range of £1.53 billion to £1.55 billion, representing a 2-3% increase at constant currency and a sub-9% EBIT margin.
Operating cash flow conversion is expected to be around 50%.
The market was generally positive of this guidance, with shares increasing 1.4% in opening Thursday exchanges.
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