Barclays analysts have revised down Watches of Switzerland Group PLC (LSE:WOSG)’s forward guidance following the luxury timepiece retailer’s Wednesday trading update.
Though Watches of Switzerland logged a record year for revenue and profitability, the group anticipates a “challenging trading environment” ahead and a modest decline in sales in the first quarter.
Interest rate headwinds and IFC charges are expected to pinch margins, leading Barclays to downgrade 2024 underlying earnings by 5.6%, profit before tax by 4.2% and earnings per share by 7.3%.
Interest-free credit comprises 10-12% of Watches of Switzerland’s sales, causing rising interest rates to have a sudden impact on operating costs, too.
“Downgrades are disappointing but we retain long-term conviction,” said analysts, though short-term downgrades “will no doubt test the conviction of some shareholders, and we believe the shares will react negatively”.
Despite these challenges, Barclays maintained an overweight stock rating, with a neutral view of the wider industry, though the price target fell 13% to 1,606p against a publication target of 741p.