TIDMWOSG
RNS Number : 5311E
Watches of Switzerland Group PLC
08 July 2021
Watches of Switzerland Group PLC
Long Range Plan
for the five-year period FY22 to FY26
Accelerate strategy by strengthening UK luxury watch leadership,
becoming US market leader and entering the EU market
Watches of Switzerland Group PLC ("the Group") is today pleased
to announce its long term plan covering its strategy for the
five-year period from FY22 to FY26.
Brian Duffy, Chief Executive Officer, 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. Through focused investment we have
built a modern, digitally advanced multi-channel retailer and have
achieved outstanding momentum in the US since our entry into the
market in late 2017.
Looking ahead, we are excited to capitalise on the significant
opportunity to accelerate our strategy. 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 roll-out of our
proven model.
Our growth projections reflect our best estimate of future
supply based on our past experience of investment and expansion.
The ability to grow in our category is partly determined by
restricted supply of key brands and is therefore not
guaranteed."
Strong Foundation for Future Growth
-- The Group has been significantly transformed since 2014 :
-- The arrival of new management in 2014 led to the investment
in systems and digital marketing to create a technologically
advanced multi-channel luxury specialist with a modern approach to
retailing
-- Consistent, sustained growth has expanded our clear market
leadership in luxury watches in the UK
-- Entrance into the US market in 2017 with a strong and growing
base established
-- FY21 Group revenue of GBP905.1 million is well balanced and
geographically diversified with 67.0% UK, 33.0% US
-- As the UK's largest luxury watch retailer, operating in both
the UK and US, today we have a unique platform:
-- What we sell: luxury watches account for 87.1% of Group
revenue, within which the top eight brands represent 81.9% of Group
revenue
-- How we sell: competitive advantages of longstanding brand
partnerships, scalable technology, marketing, well-invested
showrooms and exceptional customer service
-- Our consistent track record of profitable growth underlines the success of our strategy:
-- Revenue CAGR FY15 to FY22[1] +16.2%
-- EBIT CAGR FY15 to FY22(1) +40.2% as we leveraged sales growth
on our cost base
-- Strong cash generation with net debt reduction to GBP43.9m (2
May 2021)
-- Significant improvement in ROCE to 19.7% in FY21 (FY15:
6.7%)
Long Range Plan Highlights
-- Our strategy for growth to FY26 is focused on the major
Western markets of the UK, US and EU:
-- Total Addressable Market for luxury watches (at retail) in
these markets is approximately $21.0 billion
-- UK market has the highest per capita retail spend by domestic
customers on luxury watches; we believe the differential to other
markets reflects retail investment, not customer behaviour,
creating an opportunity to successfully replicate our model in
other geographies and building on the success we have delivered in
the US to date
-- Targeted capital investment to support growth plans over the next five years:
-- Cumulative indicative range of capex spend: GBP300.0 million
to GBP340.0 million
-- Cumulative indicative potential acquisition spend in the US
and EU: GBP150.0 million to GBP200.0 million
UK - Continuing to outperform in the strongest market for luxury
watches globally
-- The UK luxury watch market has a well invested network of retail stores and retail sales of approximately GBP1.3 billion
-- Between 2012 and 2019, the market grew by a CAGR of +10.0%,
mainly driven by average selling price increases
-- Future expected growth (2020 to 2026E): we expect the market
will continue to grow at a strong rate with a CAGR of +8.0% to
+10.0%, with a post COVID-19 pandemic recovery in 2021
-- The Group expects to outperform the market by c. 2.0% p.a.
driven by continued investment in stores, technology, digital
marketing and customer experience
US - Becoming the clear leader in the second largest market for
luxury watches globally
-- The US market for luxury watches is fragmented and
under-invested with retail sales of approximately $4.5bn
-- Between 2012 and 2019, the market grew by a CAGR of +2.0%,
with most growth achieved since 2018
-- Looking ahead, we believe the US will outperform the global
market driven by continued investment in retail from the Group and
other participants
-- The Group anticipates its US revenue will grow by a CAGR of
+25.0% to +30.0% (FY21 to FY26) supported by:
-- A strong pipeline of new projects including one Watches of
Switzerland store in American Dream, New Jersey and one Watches of
Switzerland store in Kenwood Towne Centre, Cincinnati
-- Acquisitions
-- Digital marketing becoming increasingly effective with
greater scale
-- Ecommerce: over time we believe this channel will become as
important to our US business as in the UK
-- Further expansion of the mono-brand boutique network
EU - Capitalising on growth potential in a market exhibiting
similar characteristics to the US
-- The EU luxury watch market has not grown at the same pace as
the UK since 2000; the Group believes the market is under-invested
and under-potentialised
-- The Group sees a significant growth opportunity in the EU and
plan to enter this market through acquisitions, mono-brand
boutiques as well as further growth potential in travel retail,
ecommerce and new developments
-- The Group anticipates that the EU will contribute between
5.0% to 8.0% of Group revenue by FY26
Summary: By FY26 the Group will be more geographically
diversified, with an even stronger business anchored in luxury
watches
-- We operate in a supply-constrained environment and our plan
reflects our best estimate of future supply
-- The Group is well positioned for continued strong momentum
across its existing markets, the UK and the US, and to generate
incremental revenue from entrance to a new market, the EU:
-- The Group expects the UK market to represent approximately
[44.0]% to [48.0]% of Group revenue (FY21: 67.0%) with the US
expanding to [47.0]% to [48.0]%% (FY21: 33.0%) and the EU
representing between 5.0% and 8.0%
-- Luxury watches are expected to grow to approximately 90.0% of
Group revenue (FY21: 87.1%) with growth in the complementary luxury
jewellery and after-sales servicing segments
-- Following the significant shift in sales to the domestic
customer (FY21: 94.0%; FY20: 72.5%) as a result of the COVID-19
pandemic-related reduction in tourist and airport business, during
the five-year planning period, the Group does not anticipate any
significant recovery in international tourism spend in the UK with
sales from the domestic customer (UK, US, EU) expected to be
approximately 92.0% of Group revenue in FY26
-- The Group expects to generate further operational leverage
driven by the US, the UK and ongoing geographical mix evolution
-- The Group expects to generate strong free cash flow
conversion to support growth leading to enhanced Return on Capital
Employed
-- Consistent, sustained capital investment and selective acquisitions to support growth
-- No other material new financial information will be disclosed
Long Range Plan Conference call
A webcast conference call for analysts and investors will be
held at 2.00pm (UK time) today to present this long range plan.
This will be followed by a live Q&A for analysts and
investors, which can also be accessed using the following
details:
United Kingdom (Local): +44 (0)330 336 9125
Participant Access Code: 3169793
Webcast link:
https://webcasting.brrmedia.co.uk/broadcast/60d30e6155a96337f0d9c113
Contacts
The Watches of Switzerland Group
Anders Romberg, CFO +44 (0) 116 2817 401
Allegra Perry, Investor Relations
+44 (0) 20 7317 4600
investor.relations@thewosgroup.com
Headland
Lucy Legh / Rob Walker / Joanna Clark
+44 (0) 20 3805 4822
wos@headlandconsultancy.com
About the Watches of Switzerland Group
The Watches of Switzerland Group is the UK's largest luxury
watch retailer, operating in both the UK and US, comprising four
prestigious brands; Watches of Switzerland (UK and US), Mappin
& Webb (UK), Goldsmiths (UK) and Mayors (US), with
complementary jewellery offering.
As at 2 May 2021, the Watches of Switzerland Group has 148 core
stores across the UK and US (which includes 39 dedicated mono-brand
stores in these two markets in partnership with Rolex, TAG Heuer,
OMEGA, Breitling, Audemars Piguet, Tudor and FOPE) and has a
leading presence in Heathrow Airport with representation in
Terminals 2, 3, 4 and 5 as well as five transactional websites.
The Watches of Switzerland Group is proud to be the UK's largest
retailer for Rolex, Cartier, OMEGA, TAG Heuer and Breitling
watches.
Mappin & Webb holds Royal warrants as goldsmiths,
silversmiths and jeweller to Her Majesty The Queen and silversmiths
to His Royal Highness The Prince of Wales. The Mappin & Webb
master jeweller has been Crown Jeweller, custodian of the Crown
Jewels of Her Majesty The Queen since 2012.
thewosgroupplc.com
Disclaimer
Cautionary note regarding forward-looking statements
This announcement has been prepared by Watches of Switzerland
Group PLC (the "Company"). It includes statements that are, or may
be deemed to be, "forward-looking statements". These
forward-looking statements can be identified by the use of
forward-looking terminology, including the terms "believes",
"estimates", "anticipates", "expects", "intends", "plans", "goal",
"target", "aim", "may", "will", "would", "could" or "should" or, in
each case, their negative or other variations or comparable
terminology. They appear in a number of places throughout this
announcement and the information incorporated by reference into
this announcement and may include statements regarding the
intentions, beliefs or current expectations of the Company
Directors or the Group concerning, amongst other things: (i) future
capital expenditures, expenses, revenues, earnings, synergies,
economic performance, indebtedness, financial condition, dividend
policy, losses and future prospects; (ii) business and management
strategies, the expansion and growth of the Group's business
operations; and (iii) the effects of government regulation and
industry changes on the business of the Company or the Group.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future and may be
beyond the Company's ability to control or predict. Forward-looking
statements are not guarantees of future performance. The Group's
actual results of operations, financial condition, liquidity, and
the development of the industry in which it operates may differ
materially from the impression created by the forward-looking
statements contained in this announcement and/or the information
incorporated by reference into this presentation.
Any forward-looking statements made by or on behalf of the
Company or the Group speak only as of the date they are made and
are based upon the knowledge and information available to the
Directors on the date of this announcement, and are subject to
risks relating to future events, other risks, uncertainties and
assumptions relating to the Company's operations and growth
strategy, and a number of factors that could cause actual results
and developments to differ materially from those expressed or
implied by the forward-looking statements. Undue reliance should
not be placed on any forward-looking statements.
Before making any investment decision in relation to the Company
you should specifically consider the factors identified in this
document, in addition to the risk factors that may affect the
Company or the Group's operations which are described in the Annual
Report and Accounts 2021 in Risk Management and Principal Risks and
Uncertainties.
[1] Midpoint of FY22 guidance
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