Watches of Switzerland raises FY guidance after H1 profit surge

(Sharecast News) - Luxury watch retailer Watches of Switzerland tightened its full-year guidance towards the upper end of its previous range on Tuesday after delivering strong first-half sales growth across both the US and UK, with profit growth significantly outpacing revenues.

Watches of Switzerland said group revenues rose 15% year-on-year to £974m in the 26 weeks ended 1 November, while adjusted underlying earnings were expected to have increased by around 28% to between £87m and £89m, reflecting margin expansion of 80 to 100 basis points and improved operating leverage.

The FTSE 250-listed company now expects FY constant-currency revenue growth of 7% to 10%, up from previous guidance of 5% to 10%, while EBIT margin expansion was forecast at 60 to 80 basis points, compared with prior guidance of 40 to 80 basis points.

Watches of Switzerland said the US remained the standout performer, with revenues increasing 22% at constant currency to £501m, driven by growth across its luxury watch portfolio, strong jewellery demand and contributions from its acquisition of Deutsch & Deutsch. UK revenues rose 9% to £473m, supported by improving market conditions, strong momentum at flagship boutiques and robust demand for luxury jewellery and certified pre-owned watches.

Luxury jewellery continued to outperform, with sales rising 19% at constant currency, ahead of the 15% growth delivered by luxury watches.

Watches of Switzerland also highlighted a significantly stronger balance sheet, with net debt falling to £24m from £112m a year earlier thanks to strong cash generation.

As of 1015 GMT, Watches of Switzerland shares were up 2.01% at 760p.

Reporting by Iain Gilbert at Sharecast.com

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