×
Published
Jul 8, 2021
Reading time
3 minutes
Share
Download
Download the article
Print
Click here to print
Text size
aA+ aA-

Watches of Switzerland plans EU entry, US leadership and UK growth

Published
Jul 8, 2021

Watches of Switzerland Group (WOSG) issued a strategy update on Thursday and aims to accelerate its growth by strengthening its UK luxury watch leadership, as well as becoming market leader in the US and entering the EU. It sees a total addressable retail market for luxury watches in those territories of approximately $21 billion.


Watches of Switzerland



It's an undeniably ambitious strategy, so what’s it doing to achieve it? Well, it's a long-term plan that covers the five years from its 2022 financial year up to FY26.

In the US, it sees a clear ongoing opportunity as it says the market for luxury watches is fragmented and under-invested with retail sales of around $4.5 billion. The market grew by a CAGR of 2% between 2012 and 2019, with most growth achieved since 2018. The company thinks the US can outperform the global market driven by continued investment in retail from the group and other participants. And it's predicting its American revenue to grow by a CAGR of between 25% and 30% between FY21 and FY26.

That will be supported by a “strong pipeline” of new projects including a Watches of Switzerland store in American Dream, New Jersey and one in Kenwood Towne Centre, Cincinnati. But it will also make acquisitions, boost its digital marketing and expand its e-commerce operations so that the channel becomes as important in the US to the company as it is in the UK. Additionally, the monobrand boutique network that it has in the UK will be replicated in the American market.

As for the EU, it sees similar characteristics to the US and a luxury watch market that hasn't grown as fast as the UK has done since 2000. It said “the group believes the market is under-invested and under-potentialised”. Again, it senses a huge huge opportunity here and is planning acquisitions, monobrand boutiques, further growth in travel retail, e-commerce and other developments. It's expecting the EU to contribute between 5% and 8% of group revenue by FY26,

As the US and EU markets grow, UK revenue will become a smaller part of its total turnover, although it will still be hugely important. At the moment UK revenue accounts for 67% of its total, but by the end of its strategic plan period, that should be between 44% and 48%, with the US rising to between 47% and 48% from the current 33%.

The UK continues to be hugely important as the country has the highest per capita retail spend by domestic customers on luxury watches. Between 2012 and 2019, the market grew by a CAGR of 10%, mainly driven by average selling price increases. And while growth between 2020 and 2026 is expected to average between 8% and 10% (with the market notably recovering this year), WOSG expects to outperform the market by around 2% annually as it continues to invest in its stores, it's technology, marketing and customer experience.

With all its plans in place, it now sees cumulative capital expenditure of between £300 million and £340 million in the strategy period and potential acquisition spend in the US and the EU of between £150 million and £200 million.

It will retain its laser focus on watches and the share of luxury watches in its total turnover is expected to be 90% by the end of the period, up from 87.1% today. But it's also predicting growth in the complementary luxury jewellery and after-sales servicing segments.

CEO Brian Duffy said: “Since 2014 we have delivered a sustained track record of strong, profitable growth, consolidating our position as the UK's leading luxury watch retailer. We have further developed our long-standing partnerships with the most prestigious luxury watch brands, invested in our stores and in leading edge systems and technology while further enhancing our bold, impactful and digital-led marketing approach.

“The UK luxury watch market continues to grow, and we continue to advance our leading position. In addition, we plan to achieve growth through further geographical diversification, becoming the clear leader in the US market, and establishing a presence in the EU with the targeted rollout of our proven model.”

The strength of the firm's position was confirmed by the news that it saw statutory profit before tax, rising up from £1.5 million to £63.7 million in the 53 weeks to May 2 as revenues rose 13.3% (constant currency) to £905 million. Adjusted EBITDA surged 34.9% to £105.4 million.

Copyright © 2021 FashionNetwork.com All rights reserved.