The Macro-Environmental Changes in Global Economy of Watches of Switzerland
The revenues for Watches of Switzerland have increased up to 44.6% year-on-year, with rising appetite of consumers towards luxury goods outstripping supplies. This luxury watch market is very well protected and has a strong track record as well. The officials of Watches of Switzerland say that their online sales have grown by more than one quarter with continuation in increasing demand of luxury watches. The brands that lacked limited supply were found to be strong while the average prices of selling increased for all brands (Rigby, 2021). Switzerland Watches reports the group income of £586.2m within six months till October 31. This is 44.6% of same growth as last year. The group sales of ecommerce were increased up to 28.7% last time. Pre-tax profits increased from £36.2m to £64.7m. The retailers of company have said that this growth is achieved by making consistent investments in the area of marketing, the retail stores, and the internal systems. They have spent £19.1m to open eight more new stores in first half with making digital engagement that was introduced in lockdown, a rather permanent feature (Nazir, 2021). The ‘by personal appointment’ is the booking system introduced by the company that operates alongside the virtual boutiques of luxury watches and jewelleries. During the first half of year, the company had the average social media reach of around 40.1m along with 2.9bn of digital impressions in entire country.
The research form that will be used for this project will be the secondary research while using sources like online articles, websites and journals.
The three key that will be discussed in this paper are,
- Global Economic Growth
- Major Currency Exchange Rates
- Share Price
These are the critical issues which I feel that the company is facing in their digital marketing and the global growth.
Macro-Environmental Changes in Global Economy of Watches of Switzerland
As the company is reported to be experiencing fast growth in its sales and profits, the officials and chief executives have made a five year plan for its further expansion in the global market. The strategy has been made as they see themselves entering the European Markets. The reported sales of the entire year are more than £905m along with fast growth in profits. The retailers have stated that the company have stepped up on the multichannel approach towards retailing (Earl, 2021). The reason for this growth is that the company has adapted itself in a very short time towards the disruption caused by Covid-19. In one year, the sales of luxury watches grew by 16% and it also accounted for almost 87.1% of group revenues. In present day scenario, the company is looking forward to strengthen the leadership in luxury watch market of UK, direct the US market and to step into EU market for the very first time (Corder, 2021). For the long-term plans as set by the retailers, the sales of £905.1m were reported just in 53 weeks till 2nd May. In the previous year, this ratio was 11.7% with £810.5m. The pre-taxes benefits a year back were £1.5m which rose to £63.7m this year. In the current financial year, the company is expecting the revenues to cross £1bn as the annual milestone along with top-line earnings in this year. Chief Executive of Watches of Switzerland, Brian Duffy stated that ‘Since 2014, the company has successfully delivered the constant track record of profitable strong growth, holding the position of UK’s top retailer of luxury watches. We also have further enhanced and built the long-standing powerful partnerships with other prestigious brands of luxury watches. These brands invested in the company’s stores along with leading edge technologies that enhanced the digitally led marketing approach of company’ (Wood, 2019). By focused investments, Watches of Switzerland has built multi-channel digitally advanced retailer and has successfully achieved the outstanding momentum since its entry in US market in 2017.
Watches of Switzerland’s Growth and Expansion Plans
The wealthy and richer people only had limited options to for spending their cash amidst the pandemic as there were restrictions to stay at their homes. This collected disposable income effectively found its way in the segment of luxury watch, which benefitted the Watches of Switzerland, which is the largest Rolex watches seller in Britain (Rigby, 2021). In the first quarter of 2022, Watches of Switzerland reported revenue of £297.5m ($401.3m) that was more than double in terms of constant currency over Q1 FY21 and also experienced a growth of almost 45.8% in constant currency positions when it was compared to their pre-covid sales in Q1 FY20. The segment of luxury watch that is responsible of generating around 87.1% of the total revenues of company was also almost doubled in the value by growing 97.1%. The strong demands for luxury jewelleries also significantly grew by 98.9% (Upadhyay, 2021). As said by the company’s CEO himself that the company has successfully made excellent start in the New Year with increased acceleration in momentum when comparing to growth levels before covid, accompanied by diversified growth in markets and categories. Showing optimism about the company’s growth, CEO further said that they are very excited about their planned launch of Xenia project in September 2021 which will further advance and develop the customer experience (London Stock Exchange, 2022). The company will continue investing for its future growth and will advance their marketing strategies to enhance and build up the leading position of Watches of Switzerland in UK. The GBX, which is the analyst price target for watches, as per the records of Yahoo finance is £11.01.
Figure 1 Watches of Switzerland technical analysis, weekly chart.
The stock Price for Watches of Switzerland rushed from a 171p as in March 2020, to £10.85 as in August 2021, experiencing the gain of 534% in lesser than one and a half year. This growth has pushed the Relative Strength Index (RSI) deeper into the zone of overbought, which indicated the overheating of rally in very short term. This incident has attracted the profit-booking within the stock in past days. Even though the RSI index is cooling off, but it still lies in the positive zone. The first downside support is 23.6% Fibonacci retracement level that is by 869p and if in any case this level is cracked down, the pullback could go to a percentage of 38.2 with retracement level at £7.36 (Nazir, 2021).
Figure 2 Watches of Switzerland technical analysis, daily chart
The stock prices of Watches of Switzerland have been trading in an ascending channel from past several months. However they pushed the price beyond the channel’s resistance line in July 2021, but were unable to build up the breakout. On the upper side, amount of £10.85 acted in accordance to stiff resistance and the stock was also able to make up little double top whose target objective is £8.68 (Corder, 2021). This level is so close to the ascending channel’s support line thereby expecting the bulls to defend it in either ways. If however the prices bounces off the support line, this will pave the way for stocks to continue their upward trajectory within the channel. The stock bearers will have to pull off and sustain the prices running below the channel’s support line in order to signal a positive and possible change in the trends. This way, the stock could drop to £7.00 and further to £6.50 (Butler, 2016).
The Impact of COVID-19 on Watches of Switzerland’s Sales and Profits
The exports of the Swiss watches increased by 13.4% in July due to the exploitation of tourists in dropping the value of pound to buy luxury goods. The Swiss Watch Industry’s Federation has reported that the watches that were worth 110.2m of Swiss Francs £87m were exported to United Kingdoms in the last month and these are the best figures in the stock market of company since 2015. The rise in these figures is the latest sign of boost for the retailers of luxury items followed by the result of EU referendum. This referendum has reduced down the value of Sterling which made the shops in Britain to attract more customers and foreign visitors (Minder & Gomelsky, 2015). The jewellery and watches sales grew by almost 16% in UK in last month. According to the analysts at Exane BNP Paribas, UK has now become the cheapest market for luxury goods in world. This prediction also includes an upliftment of other British brands like Burberry and Stella McCartney as the increased value of euro and dollar against pound (Donzé, 2018). The tourist inflows and the spend are directly related to exchange rates. The growth in export values of Swiss watches in UK when compared to their reports in July 2015 has made Britain as the fastest-growing market for selling brands like Omega, Rolex and Breitling (Raffaelli, 2019). This has been very predictive by the growth going on the sales market of Swiss watches that this is only evident in London and airport stores of Swiss Watches. As remarked by Duffy, ‘The Company is selling a lot of high-end pieces where the saving amounts can undoubtedly justify the foreign travel’s cost’.
References
Butler, S., 2016. Swiss watch exports to UK rise as tourists make most of fall in sterling. [Online]
Available at: https://www.theguardian.com/business/2016/aug/23/swiss-watch-sales-rise-in-uk-after-sterling-fall
[Accessed January 2022].
Corder, R., 2021. How did Watches of Switzerland Group boost sales by almost 50%?. [Online]
Available at: https://www.professionaljeweller.com/how-did-watches-of-switzerland-group-boost-sales-by-almost-50/
[Accessed January 2022].
Donzé, P.-Y., 2018. How to Enter the Chinese Luxury Market? The Example of Swatch Group. Global Luxury, pp. 177-194.
Earl, N., 2021. Good timing: Watches of Switzerland’s revenues rise amid resurgent consumer appetite for luxury goods. [Online]
Available at: https://www.cityam.com/good-timing-watches-of-switzerlands-revenues-rise-amid-resurgent-consumer-appetite-for-luxury-goods/
[Accessed January 2022].
London Stock Exchange, 2022. The Watches of Switzerland Group PLC. [Online]
Available at: https://www.londonstockexchange.com/stock/WOSG/watches-of-switzerland-group-plc/company-page
[Accessed January 2022].
Minder, R. & Gomelsky, V., 2015. Swiss Watchmakers Jolted by Currency Shock. [Online]
Available at: https://www.nytimes.com/2015/01/22/business/international/swiss-watchmakers-jolted-by-currency-shock.html
[Accessed January 2022].
Nazir, S., 2021. Watches of Switzerland sales smash £418m. [Online]
Available at: https://www.retailgazette.co.uk/blog/2021/11/watches-of-switzerland-sales-smash-418m/
[Accessed January 2022].
Raffaelli, R., 2019. Technology reemergence: Creating new value for old technologies in Swiss mechanical watchmaking, 1970–2008. Administrative Science Quarterly, 64(3), pp. 576-618.
Rigby, C., 2021. Watches of Switzerland sees fast online, sales and profits growth. [Online]
Available at: https://internetretailing.net/strategy-and-innovation/strategy-and-innovation/watches-of-switzerland-sees-fast-online-sales-and-profits-growth-24159
[Accessed January 2022].
Rigby, C., 2021. Watches of Switzerland sets out five-year plan for expansion as it reports fast growth in sales and profits. [Online]
Available at: https://internetretailing.net/international/international/watches-of-switzerland-sets-out-five-year-plan-for-expansion-as-it-reports-fast-growth-in-sales-and-profits-23412
[Accessed January 2022].
Upadhyay, R., 2021. Watches of Switzerland stock analysis: has the rally ended?. [Online]
Available at: https://currency.com/watches-of-switzerland-technical-analysis-september-30-2020
[Accessed January 2022].
Wood, Z., 2019. Watches of Switzerland increases revenue and profits forecast again. [Online]
Available at: https://www.theguardian.com/business/2020/dec/17/watches-of-switzerland-increases-revenue-and-profits-forecast-again [Accessed January 2022].
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