If anyone was going to take a major hit from Coronageddon, you’d expect it to be Watches of Switzerland. The publicly traded company has 16 stores in its UK backyard, two in New York City and three at the Wynn Las Vegas. All closed by the pandemic. So their latest financial results is a bloodbath of red ink, right? Apparently not . . . .
According to the mainstream press, Watches of Switzerland absolutely killed their financial results, released today. Revenue up six percent! eCommerce up forty-six percent! Has TTAW’s doom and gloom been misinformed and misguided? Let’s take a closer look . . .
Props to WatchPro.com for telling it like it is: Lock down costs The Watches of Switzerland Group $15 million per week in lost sales. Here’s the money shot:
The shutdown trimmed annual growth from 15.8% to 5.9%, finishing the financial year at £819.3 million. Had sales growth of 15.8% continued for another six weeks up to the end of the financial year, it would likely have added £76.4 million or £12.7 million per week (around $15 million).
Bottom line: Watches of Switzerland’s business is about £80mm ($97.5m) smaller than it would have been if China hadn’t unleashed COVID-19 on the world.
It’s hard to extract seasonality from the watch business, but the first three-quarters of fiscal year 2019 WoS did £687mm in sales. They were expecting a full year of £880mm, in line with market expectations.
Watches of Switzerland was expecting to do £193mm in this quarter, or about £15mm a week. Assuming they did that for the first seven weeks of the quarter, they would have gone into the last six weeks at £792mm, with £90mm to go.
In reality, Watches of Switzerland only took in £27mm in six weeks. That’s less than £5m a week, or 70 percent below expectations.
Chew on that. A seventy percent decline in sales. Even when eCommerce is “booming.” And they still have to pay their rent, employees, suppliers and so forth.
Even when WoS were crowing about their year, they were was legally obliged to mention the fact that they took a £45mm ($54.8m) from the U.K. government. That ain’t hay.
Simply put, Watches of Switzerland is hurting.
Online sales replaced the barest fraction of in-store sales. Which means either a) their customers don’t like shopping online and want the in-store experience or b) despite the happy talk about revenge shopping, consumers aren’t spending their money on luxury watches.
Neither are particularly good news in a post-coronavirus world, but one is much much worse. As states and countries open back up, we will have a chance to see if the return of bricks and mortar retail tops up corporate coffers in the middle of a worldwide recession. Watch this space.