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Luxury Resilience: Pre-Owned Rolex Sales Double for Watches of Switzerland Group Amid Economic Shifts

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Michael Chen

May 16, 2024 - 07:43 am

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Watches of Switzerland Group Sees Soaring Sales in Pre-Owned Luxury Timepieces

In an impressive display of resilience within the luxury goods sector, Watches of Switzerland Group Plc witnessed a remarkable upswing in the sale of pre-owned Rolex and other second-hand high-end watches. The surge occurred during the final quarter, contributing significantly to the company's financial health, presenting outcomes that surpassed the expectations of worried investors.

Second-Hand Luxury Watch Sales Spike Amid Economic Concerns

The UK's foremost Rolex vendor reported an encouraging 3% rise in overall sales, amounting to £380 million ($482 million) for the fiscal quarter concluding on April 28. Market analysts had previously pegged their forecasts at £375 million, slightly under the mark. The remarkable uptick in sales was primarily powered by an unexpected boom in pre-owned watch transactions, including Rolexes, under the Swiss watchmaking colossus's 'certified pre-owned' program. In comparison to the preceding year, the figures were doubled in the reported duration. Furthermore, the thrust in branded jewelry sales also exceeded presumptive calculations, contributing to a robust trading update on Thursday.

Company’s Shares and Market Fluctuations

Investors have a good reason to be optimistic, given the comparatively stalwart fourth-quarter sales figures, which are more stable than one might have projected in light of enduring economic uncertainties. This sentiment is underscored by Jefferies analyst James Grzinic in a freshly prepared communication, in which he emphasized the company's vigorous performance spanning both the UK and US markets.

Yet, despite these buoyant sales reports, Watches of Switzerland saw its shares plummet by over 50% in 2024, sparking worries regarding potential market share losses. This decline was precipitated by the acquisition of Bucherer AG, a rivalling watch retailer, by Rolex itself. This move denoted Rolex’s first serious engagement in direct sales endeavours, shaking up the traditional retail landscape where independent third parties, like Watches of Switzerland, have dominated.

Market Share Concerns and Sales Forecasts

Earlier this year, the firm voiced concerns over weaker than anticipated sales, citing a deficiency in the allocated quantity of gold and other precious metal watches from Rolex. Moreover, a sense of caution among UK consumers had also been impacting sales. Despite these headwinds, the company has stood firm on its ambitious long-term financial objectives, reasserting its aim to more than double its sales and earnings before interest and taxes by 2028. Looking into the immediate future, Watches of Switzerland anticipates sales ranging from £1.67 billion to £1.73 billion for the year 2025, a figure that is slightly ahead of the consensus estimate of £1.65 billion put forth by industry analysts.

The integration of pre-owned luxury watches into the company's portfolio has proven to be a strategic masterstroke, effectively padding the bottom line in a period of uncertainty. This strategic expansion into the secondary market caters to an emergent clientele proactively seeking high-quality timepieces with history, at price points more attainable than their brand-new counterparts.

The Allure of Pre-Owned Luxury Watches

With the soaring interest in pre-owned luxury watches, such as those from Rolex, the company has tapped into a niche market with vast potential. Second-hand luxury watches are not merely transactions; they encapsulate the essence of timeless elegance, each with its own unique narrative and patina. This narrative has been a driving force in doubling sales figures within the niche. The certified pre-owned program offered by Rolex provides assurance to the clientele, amalgamating the dependability of the brand with the monetary allure of the secondary market.

Sales of branded jewelry have also seen a marked surge, denoting consumer confidence in luxury goods despite the overriding macroeconomic ambiguities. A robust selection of pieces from various esteemed brands adds to the group's diversified offerings, appealing to a broad spectrum of preferences in the luxury accessories sector.

The Role of E-Commerce and Physical Retail

The company's foray into e-commerce has been another perceptible element of its strategy, accommodating the shift in purchasing habits of consumers who increasingly lean towards online platforms for luxury buys. In juxtaposition, the physical retail locations continue to offer an unmatched tactile experience central to the luxury shopping ritual - an experience that cannot be replicated in the digital realm.

As Watches of Switzerland diversifies its approach, maintaining a balance between traditional physical outlets and modern digital platforms, it strategically captures both sides of the consumer spectrum.

Analysts' Perspectives and Future Outlook

The broadened outlook by analysts points towards a cautiously optimistic future for Watches of Switzerland. Jefferies' James Grzinic's recognition of the company's solid fourth-quarter performance further solidifies the sentiment that Watches of Switzerland has strategically weathered the current retail storm better than many had foreseen. This is particularly noteworthy since the company's shares had been trending downwards amid fears of market share dilution following Rolex's entry into direct sales with the purchase of Bucherer AG.

Grzinic's acknowledgment of the resilience in sales, especially in the UK and US, suggests that the company has managed to retain a significant consumer base despite the competitive pressures. This has been possible due to a deliberate focus on developing areas of the market such as used watches and branded jewelry, which have seen positive upticks despite broader economic headwinds.

Reiterating Ambitious Targets

Amid concerns regarding its market position and sales potential, Watches of Switzerland remains undeterred, reiterating its ambitious targets for long-term growth. The company's projection of potential sales reaching between £1.67 billion and £1.73 billion in 2025 is a beacon of confidence not just for the enterprise, but also for investors and market analysts. This forward-looking statement, surpassing the estimates of analysts who anticipate sales of £1.65 billion, embodies the firm's conviction in its strategies and its foothold in the luxury watch market.

Watches of Switzerland's Strategic Vision and Market Adaptability

The ability of Watches of Switzerland to readapt its strategies in response to market dynamics and consumer shifts has been integral to its continued success. The strategic vision, including the expansion into the certified pre-owned market space and strengthening its e-commerce operations, demonstrates an agile approach to business. In doing so, the company not only safeguards its existing consumer demographic but also taps into new customer segments seeking the prestige of luxury brands without the premium of retail pricing.

To provide further insight, explore Watches of Switzerland’s performance by clicking here.

Conclusion

In conclusion, Watches of Switzerland's reportable doubled sales in used luxury watches and stronger-than-anticipated branded jewelry sales are cerebrations worthy achievements during a tumultuous economic phase. Although the company's shares may have been impacted by a broader market skepticism and Rolex's acquisition of Bucherer AG, the insistence on robust sales forecasts paints an optimistic picture for the future. The company's determination to uphold its long-term growth plan, despite setbacks, is a testament to its strength in the luxury retail sector. Moreover, these results underscore the perpetual allure of luxury timepieces that transcend economic cycles, continually drawing consumers with their promise of durability, craftsmanship, and status.

Moving forward, Watches of Switzerland's strategic adaptability and its penetration into pre-owned and e-commerce markets will likely continue to play pivotal roles in its ability to overcome challenges and maintain a growth trajectory in alignment with its ambitious targets.

©2024 Bloomberg L.P.