Watches of Switzerland (WOSG) has reported flat sales and a significant decline in earnings for the first half of the year, as the global luxury goods market experiences a downturn.
On a constant currency basis, the watch and jewelry seller saw a 2% increase in sales, amounting to £761 million ($957 million), for the six months ending on October 29. However, the company’s U.K. and Europe division experienced a 4% decline in sales, which was partially offset by an 11% rise in U.S. sales.
The largest luxury timepiece retailer in the U.K. announced a statutory operating profit drop of 16% to £78 million, citing higher costs as the reason for eroding profit margins. Despite suffering a 30% loss in value over the previous 12 months, Watches of Switzerland shares increased by 1% on Thursday.
Watches of Switzerland attributed its flat sales performance to the “challenging” consumer environment in Britain and the closure of several British showrooms that affected the revenues of its U.K. and Europe arm. The global luxury goods market downturn also impacted firm-wide revenues, with a 15% decrease in sales from the jewelry division to £47 million. However, there was a 3% increase in sales from the luxury watches arm, amounting to £670 million, as demand for watches remained strong, particularly in the U.S.
Despite these challenges, Watches of Switzerland maintains that it is on track to meet its full-year guidance. The company plans to reopen showrooms that were closed for refurbishment in the first half, and it is focusing on expanding its U.S. business, which currently contributes two-fifths of its revenues. As part of this expansion, Watches of Switzerland will open 19 new showrooms worldwide, including nine in the U.S. Additionally, the company has reached a deal with British jeweler Ernest Jones to acquire 19 showrooms in the U.K.