Timely update lifts former FTSE 250 high-flyer

Watches of Switzerland is back in the mid-cap spotlight today as a robust trading update helps shares to unwind more of this year’s hefty losses.

Mid-cap investors have taken a fresh look at Watches of Switzerland (LSE:WOSG) after one of last year’s stars of the FTSE 250 allayed some of their fears over a slowing luxury goods market.

The Rolex and Breitling retailer, which trades as Mappin & Webb and Goldsmiths in the UK and Mayors and Betteridge in the US, boosted City confidence today when it posted better-than-expected first quarter sales and stuck by full-year guidance.

The company pointed out that sales of luxury watches in the three month period jumped 32% to £342 million, representing 87% of its total.

• Read about how to: Open a Trading Account | How to start Trading Stocks | Top UK shares

Shares were among the best performing in the FTSE 250 last year but have derated due to the impact of economic uncertainty. The stock started the year at more than 1,500p but reversed to 750p by July, not helped by reports that weaker China confidence and the crypto market collapse had led to a flood of watches into the second-hand market.

But today’s update from the company shows that its prices remain elevated and that appetite for the company’s iconic watches is strong. Analysts at HSBC said: “Today’s publication is a testament to that pent-up demand with waiting lists for the group’s products continuing to extend versus three months ago.”

• 20 ‘quality’ stocks backed for tougher times
• Stockwatch: a high-flying growth stock plunges, is it time to buy?

The shares have rallied by more than 20% to 915p in the past month but HSBC believes there’s the potential for a further upside to 1,230p. The bank added: “We believe investors should be reassured by the magnitude of sales growth for the group.

“However, we also understand that seeing is believing and that the run-up to the key holiday season will be the ultimate test of resilience for the company’s sales and, thus, share price.”

Counterparts at Barclays have a target of 1,180p and said today’s unchanged guidance with nine months of the financial year still to go was a sign of management pragmatism, rather than being blinkered about macroeconomic risks and endorsing upgrades.

They added: “In the long-term, Watches of Switzerland has one of the best runways for growth in our coverage.”

• Share Sleuth: with three firms to choose from, here’s the one I bought
• Read more of our content on UK shares here

Growth opportunities in the US are part of the reason for this optimism, particularly after the company today reported a 76% jump in first quarter sales to £152 million. In the UK,  sales improved 8% to £239 million.

This was better than the 5% improvement forecast by Jefferies and followed the reopening of airport showrooms and continued resilience among the domestic customer base.

In a further sign of its confidence, the company is relocating its 900 sq ft Rolex Boutique on Bond Street to a new 7,200 sq ft location on Old Bond Street. Chief executive Brian Duffy said: “This new flagship will reflect the importance of the London market and the special relevance of London to the history of Rolex."