Watches of Switzerland Group today provides the following business update in light of the ongoing and rapidly evolving situation regarding COVID-19.
Current trading and FY20 guidance
For the 7 weeks to 15 March 2020, Group revenue increased ahead of expectations, up 16.8% relative to the prior year and Like-for-Like (LfL) sales increased 12.0% relative to the prior year. As a result of the COVID-19 outbreak, during this period, the Group’s travel and tourism business were adversely impacted by reduced footfall. This impacted the Group’s trading in stores located within the airports, in London, and in Las Vegas. However, the Group was able to offset the impact through higher sales to domestic customers both in the UK and the US.
However, in light of the accelerated containment measures relating to the COVID-19 outbreak adopted by governments, the Group’s store portfolio has been closed in the US as of 19 March 2020 and will be closed in the UK as of 23 March 2020. As a result, the Group currently expects total revenue for the year to 26 April 2020 to be in the range of £809 million to £812 million.
Given the current environment, the Group has taken steps to eliminate discretionary expenditure, reduce working capital and where possible, delay capital projects. Government measures announced of business rates suspension, employee cost support and tax payment deferrals, are expected to have a positive impact on cash planning. The Group has taken steps to ensure the continuity of the ecommerce proposition, with online operations expected to be continued as normal.
The Group has a strong balance sheet (1.2x adjusted net debt/EBITDA as at 15 March 2020) and significant financial headroom and liquidity. These facilities and the actions implemented would enable the Group to manage through a prolonged period of store closures.
The Group operates with a high level of variable and semi variable cost. Government measures on rates and employee costs are expected to further reduce the proportion of fixed costs.
Brian Duffy, chief executive officer, said: “Our priority is the health and wellbeing of our colleagues and customers during these unprecedented times. We are taking the necessary steps to mitigate and minimise the impact of this crisis on our business.
“We are anticipating a continuation of the store closures into our new financial year which begins on 27 April 2020. We remain confident in the strong fundamentals that underpin the luxury watch category including its great value preservation. Demand remains strong and we anticipate that this will be the case when the market returns to more normal conditions.
“Longer term, we are well positioned to deliver on our plans to leverage our leading position in the UK and become a leader in the US luxury watch market.
“I would like to extend my respect and gratitude to our teams in the UK and in the US who, as ever, have been resilient, resourceful and positive throughout this period.”