(Alliance News) - Watches of Switzerland Group PLC on Thursday reported a "strong" performance in the recent financial year, as revenues rose and profits soared on the strength of online and domestic sales.
The Leicester-based retailer of Swiss watches saw its pretax profit shoot up to GBP63.7 million in its financial year that ended May 2, compared to only GBP1.5 million the year prior.
Despite 26 weeks of store closures, the retailer's revenue jumped to GBP905.1 million, up 12% from GBP810.5 million as strong domestic and online sales offset lower tourist and airport trade.
Watches of Switzerland said its products were an "attractive option" for customers with "accumulated disposable wealth" in a year of retail closures and travel restrictions.
The retailer opened 18 new stores in financial 2021, compared to 5 the year before and 8 showrooms in financial 2019.
Watches of Switzerland said it adapted to the changing environment with a virtual watch and jewellery boutique, personal appointment system and consistent social media advertising and product launch promotions.
Net debt stood at GBP43.9 million on May 2, down from GBP129.7 million on April 26, 2020. The company noted it has repaid all furlough payments received from the UK government's Coronavirus Large Business Interruption Loan Scheme.
It didn't declare a dividend for the recent year, unchanged from financial 2020.
Provided there are no further national lockdowns, Watches of Switzerland predicts revenue between GBP1.05 billion and GBP1.10 billion in the coming financial year, based on somewhat improved airport traffic and tourism.
Meanwhile, the retailer is eyeing more "selective, strategic acquisitions" as it prepares a programme of US and UK store openings and refurbishments in financial 2022.
With a strong set of results secured, Watches of Switzerland outlined its plans for the next five years.
Up to financial 2026, the company plans to diversify its geographical reach, expanding its presence and further consolidating what it considers to be a somewhat "under-invested and under-potentialised" luxury watch market in the US and European Union.
At present, the UK domestic market has the highest per capita retail spend on on luxury watches, representing 67.0% of the retailers revenue in financial 2021.
Watches of Switzerland believes the UK's high per capita spend reflects retail investment not consumer behaviour. It plans to expand this strategy elsewhere, reducing the UK's revenue share to between 44.0% and 48.0% whilst increasing the US share to near 48.0% and European share to around 8.0%.
The company estimates the US luxury watch market is worth USD4.5 billion. In its attempt to expand into that market, Watches of Switzerland expects compound US revenue growth between 25.0% and 30.0% to the 2026 financial year.
To fulfil its ambitions the company plans targeted investment, with a cumulative indicative range of capital expenditure between GBP300.0 million and GBP340.0 million, with about half directed towards the US and Europe.
Chief Executive Brian Duffy said: "The momentum we bring into [the 2022 financial year] underpins our confidence for the financial year ahead. Sustained capital investment will continue to support our growth plans in the UK. Our success in the US proves our model works in this market and we will continue to invest in our stores and new projects, whilst pursuing selective acquisitions at attractive returns in our ambition to become the clear leader in the market.
"We are confident in our plans to build on our long term track record of sustained growth to capitalise on the significant growth opportunities available," Duffy added.
Shares in Watches of Switzerland were trading down 1.9% at 839.00 pence each in London on Thursday morning.
By Scarlett Butler; scarlettbutler@alliancenews.com
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Watches Switz (WOSG)
