Potential investors in Watches of Switzerland Group have been looking for a reason to buy back in over recent months and they appeared to be encouraged by the business closing out FY24 in line with downgraded forecasts shared in January and a “cautiously optimistic” forecast for FY25 and beyond as its share price jumped 20% on the day to close at 405p.
That is still 30% below its 587p price before the revised forecast of January 16 and 690p value the day before Rolex announced it was buying WoSG rival Bucherer.
Concerns persist that Bucherer will be favoured by Rolex with better allocations and that WoSG’s stated intention to acquire retailers aligned with The Crown will be more limited.
In 2029, Rolex accounted for over half of WoSG’s turnover, but the group has been diversifying into other watch brands with more flexible supply and has a stated aim to expand its branded jewellery business, a mission that was turbocharged earlier this month when it bought the US operation of Roberto Coin.
The Roberto Coin purchase is likely to add over $150 million of jewellery sales to the company’s accounts in the current financial year; more than doubling the FY24 contribution from jewellery, which was £102 million.
Even if jewellery (retail and wholesale) generates turnover of over £250 million in FY25, it will be dwarfed by luxury watch sales, which stood at £1.345 billion in the year ended in April.
But that does mean less reliance on what WoSG CEO Brian Duffy calls “supply-constrained watch brands”, which also includes Patek Philippe and Audemars Piguet, both of which are trimming doors with retail partners.
In today’s trading update, the company also announced that Rolex Certified Pre-Owned (Rolex CPO) performing ahead of expectations and will be rolled out across more doors in 2025.
Total pre-owned and vintage sales, including Rolex CPO, doubled in Q4 FY24 against prior year, the company shared, without providing hard revenue information for what still represents a miniscule part of group business.
The direction of travel is towards a more diversified portfolio that gives the company more flexibility and control but these are still early stages of the project after a decade of spectacular success with Rolex that left it over-reliant on a single partnership.
Even if we assume (as I do) that the contract with Rolex is rock solid, questions remain over how much growth it can expect from the brand.
Mr Duffy used to regularly tell me that the only way of securing better allocations was to keep building bigger and better Rolex real estate.
WoSG will be opening Europe’s biggest showroom for the brand on London’s Bond Street next year, but that construction- or acquisition-led path to more watches looks increasingly narrow in the wake of the Bucherer deal.
That may be why the group appears to have abandoned its push into Continental Europe. Over the past couple of years, it has opened monobrand boutiques for the likes of TAG Heuer and Breitling as a bridgehead on the other side of the Channel, but now says it will withdraw and focus its investment in the UK and USA.
“We are in negotiations with our brand partners for the transfer of our existing European monobrand boutiques,” a trading statement revealed this morning.
So Watches of Switzerland is both diversifying on the supply side while narrowing its focus when it comes to retail, and now wholesale with Roberto Coin, in its two strongest markets.
That shows notable pragmatism and flexibility for a group already generating sales of over £1.5 billion, and investors buying in today suggest they feel the group remains on track to hit turnover of £3 billion by 2028.