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(Alliance News) - Watches of Switzerland Group PLC on Thursday reported a sharp drop in financial 2020 pretax profit, but a rise on adjusted basis, and said that trading in the first quarter of financial 2021 is ahead of management expectations, with sales growth in June and July versus a year prior.
Chief Executive Officer Brian Duffy said: "While we began financial 2021 with our global store portfolio closed due to the pandemic, we were well prepared for the re-opening of our stores during first-quarter and trading has exceeded our expectations in both the UK and the US.
"The UK has been driven by continued strong e-commerce sales and domestic demand in regional stores, partly offsetting greater declines in London, due to reduced tourism, and our airport stores. The US continued to gain momentum during the period with all re-opened stores performing strongly versus the prior year."
Shares in the company were up 19% at 312.47 pence each in London on Thursday morning, one of the top performers in the FTSE 250 index. Year-to-date, however, the stock remains down 17%.
The British retailer of Swiss watches said that revenue for the 13 weeks to July 26 was ahead of management expectations at GBP151.6 million, versus GBP209.4 million a year ago, impacted by store closures during the period. The core UK market saw quarterly revenue fall 30% to GBP108.3 million, while US revenue was down 20% at GBP43.3 million.
The company re-opened majority of its stores during the first-quarter, with July registering 7.4% growth in sales versus a year ago, the first full month when the majority of the network was re-opened. June sales were up 0.3%, while May registered a 83% drop.
For the 52 weeks to 26 April - the retailer's first year as public company - pretax profit plummeted to GBP1.5 million from GBP20.1 million profit in financial 2019. This was mainly due to exceptional costs totalling GBP28.5 million, relating to the company's stockmarket listing in London and the Covid-19 pandemic.
Adjusted pretax profit, however, saw an 87% jump to GBP49.4 million.
Annual revenue grew 4.8% to GBP810.5 million from GBP773.5 million. For the first 46 weeks of the year to March 15, revenue increased 16% driven by the sales of luxury watches. However, the final two months of the year suffered from store closures and recorded an 85% drop in revenue.
By division, UK saw annual revenue decline 0.5% to GBP585.5 million in the recent financial year. The US unit's sales rose by 40% to GBP225.0 million.
For financial 2021, Watches of Switzerland is predicting revenue between GBP840.0 million and GBP860.0 million and flat margins.
"During financial 2021, whilst the group expects domestic demand to remain buoyant in both the UK and the US, it anticipates limited but improving airport traffic and foreign tourism in the UK and limited domestic tourism in the US, with gradual and moderate improvement throughout the financial year," the company said.
By Tapan Panchal; tapanpanchal@alliancenews.com
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