Watches of Switzerland (LSE: WOSG) reported a 40% decline in profits for the last fiscal year. – Share Talk

Watches of Switzerland Group PLC (LSE: WOSG) reported a 40% drop in profits last year, but noted that the UK market is stabilizing and growth in the US is projected to soon account for half of the group’s sales.

The luxury watch and jewellery retailer maintained its “cautiously optimistic” outlook for the new year, highlighting that the industry is adopting a more conservative approach by slowing production amid a broader luxury market slowdown, while prices have risen sharply.

Statutory profit before tax fell 40% to £92 million, with an adjusted EBIT of £135 million for the 52 weeks ending April 28, 2024, an 18% decline year-on-year but within the recent guidance range of £133-136 million.

Revenue remained flat at £1.54 billion, with US sales increasing by 11% on a constant currency basis to £692 million, while UK & Europe sales decreased by 5% to £846 million. Watch sales, which constitute 87% of the group’s revenue, rose by 3%, whereas jewellery sales dropped by 13%.

The launch of its Rolex certified pre-owned offering last year boosted revenues in both regions, contributing to a doubling of pre-owned and vintage sales.

Cash flow decreased by 19% to £118 million, and the company continued to withhold shareholder returns, prioritizing investment in new showrooms and strategic acquisitions, such as the recent purchase of jewellery brand Roberto Coin.

CEO Brian Duffy noted that the UK market is “starting to show signs of stabilisation” despite last year’s decline in UK & European sales, which was influenced by significant price increases and reduced consumer confidence. He anticipates these pressures will ease in FY25.

Looking ahead, the company is focusing on showroom developments on both sides of the Atlantic, with a robust pipeline of committed projects, including flagship stores in London and Manchester, as well as in Atlanta, Georgia, and Plano, Texas.

Duffy emphasized the “significant opportunity” in the pre-owned market, with pre-owned luxury watch sales doubling year-on-year in the fourth quarter. The new Rolex-certified pre-owned program has exceeded expectations in both the US and UK, with further expansion planned for FY25.

For the year ending April 2025, Watches of Switzerland projects revenue growth of 9-12% to £1.67-1.73 billion, with an improvement in the adjusted EBIT margin by 0.2-0.6 percentage points.