Forget demand worries stirred up by inflation and a slowing economy, a shortage of top-brand timepieces is still the biggest problem for the UK’s largest seller of Rolex watches.
Demand for most Rolex, Audemars Piguet and Patek Philippe watches has long outstripped supply, but now the problem is spreading to other high-end brands, including Zenith, Omega and IWC, said Brian Duffy, chief executive officer of Watches of Switzerland Group Plc.
“A lot of what we are selling we can’t get enough of in the first place,” Duffy said in an interview. “The whole industry is characterised by more demand than supply.”
Three-quarters of the retailer’s sales, by value, are done through customers getting on waitlists because the timepieces they want aren’t in stock. Watches of Switzerland is still adding more people to waitlists than it’s taking off — leaving the retailer well insulated from an economic slowdown, said Duffy.
“Even if there is an impact in demand it will be a long time coming before we feel it,” he said.
Watches of Switzerland is the top retailer of Rolex in the UK and among the biggest in the US, with an estimated 9 percent market share. Duffy said his stores are struggling to keep Zenith chronographs, IWC pilot watches and Omega’s James Bond Seamaster and Speedmaster models in stock.
“Omega, we can’t get enough of. All the new products,” Duffy said.
The CEO said he expects the retailer’s supply of Tudor watches will increase as they are currently under-supplied.
Watches of Switzerland’s strategy is to grow its retail presence to give it more clout to commandeer supply from Swiss watchmakers. It grew in-store and online sales by 48 percent in the US to £428 million ($512 million) in its 2022 fiscal year.
“We could have grown even more if we had more supply,” Duffy said.
Watch prices have already increased by an average of 4 percent to 5 percent this year, and Duffy said he doesn’t expect brands to implement another significant increase in 2022.
Sales of luxury watches surged during the pandemic as homebound consumers, flush with cash, snapped up Rolexes and other timepieces, sending prices for many secondhand models soaring. Now, secondary market prices for the most sought after Rolex, Audemars Piguet and Patek Philippe watches have started to decline as equities and cryptocurrency valuations tumbled.
The company on Thursday reported pretax profit of £126 million for the 12 months ending May 1, almost double its earnings the previous year.
The record performance was helped by the UK, it’s home market, where revenue soared 36 percent. Any disruption from the pandemic is now “largely behind us,” the company said.
The retailer reiterated its revenue forecast of £1.45 billion to £1.50 billion for this fiscal year, as well as its outlook for profitability.
By Andy Hoffman
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