FTSE 250 movers: WoS ticks along; Currys slides despite AI hopes

27th Jun 2024 14:46

(Sharecast News) - FTSE 250 (MCX) 20,340.24 0.21%

Watches of Switzerland shares surged on Thursday as the luxury timepiece seller held current-year guidance and said it was "cautiously optimistic" after annual profits fell amid a wind-back of discretionary spending.

Pre-tax profit for the year to April 28 fell 40% to £92m with revenues flat at £1.53bn in a "challenging" market hit by rising prices from manufacturers, the strength of the Swiss franc and low consumer confidence.

Chief executive Brian Duffy said pre-owned watches presented a "significant opportunity" for the company with second-hand luxury watch sales doubling year-on-year in the final quarter of the 2024 financial year.

"Within this category, the new Rolex certified pre-owned programme is performing ahead of our expectations in both the US and UK and is set for further roll-out in full-year 2025 with improved methods of supply in the UK," he said.

UK and Europe revenue fell 5% to £846m impacted by macroeconomic conditions in the UK and a minimal return of tourist spending due to lack of VAT free shopping, the company said. It was a brighter picture in the US, where sales rose 6% to £692m.

"Following the more challenging trading conditions of full-year 2024, we are cautiously optimistic about trading in full-year 2025. The industry as a whole is being more conservative on production, which we believe is a responsible approach to the long-term stability of the luxury watch market."

WoS full-year guidance forecasts revenue of between £1.67bn - £1.73bn, reflecting constant currency sales growth of 9% - 12%. Adjusted earnings before interest and tax margins are expected to grow by 0.2 to 0.6 percentage points from last year.

The company also expanded into the high-end jewellery market last year with the purchase of Roberto Coin in the US for $130m.

"Watches of Switzerland was in demand with investors after saying the UK market was starting to stabilise. The company has been through a difficult period as growth moderated and cracks appeared in the luxury goods sector despite people previously thinking wealthier individuals would be immune to the cost-of-living crisis," said AJ Bell investment director Russ Mould.

"The absence of any more bad news was good enough to prompt a reassessment of the business by the market, hence a strong share price reaction to the results."

Shares in Moonpig Group sparked on Thursday, after the online greeting card retailer posted a jump in annual sales and profits.

Revenues in the year to 30 April came in at £341.1m, up 6.6%, while adjusted earnings before interest, tax, depreciation and amortisation rose 13.5% at £95.5m.

Pre-tax profits were ahead nearly 33%, at £46.4m.

The group attributed the growth to strong trading at its core Moonpig brand - which saw revenues rise 8.2% - an improved gross margin rate and an above-forecast performance from its recently introduced subscription service.

Nickyl Raithatha, chief executive, said trading had also strengthened across peak trading periods in the second half.

"This has been driven by our multi-year investments in technology and innovation, which continue to foster extraordinary customer loyalty," he continued.

"The Moonpig Plus subscription scheme has exceeded our expectations, passing the milestone of half a million members within one year."

Looking to the current year, Moonpig said trading since the start of the year had been in line with expectations.

It continued: "In the context of the current macroeconomic environment, we expect 2025 full year revenue growth, after adjusting for temporarily higher breakage on experience vouchers in 2024, at a mid to high single digit percentage rate, underpinned by growth in orders at the Moonpig brand."

UK electricals retailer Currys said trading in the current fiscal year was in line with expectations after 2023/24 adjusted earnings rose 10% and was pinning its hopes on the increasing use of artificial intelligence in electronic goods.

The company, which sells everything from laptops to fridges, on Thursday said adjusted pre-tax profit of £118m, up from the £107m reported in in 2022/23. Revenue fell 4% to £8.48bn as the cost-of-living crisis continued to weigh on discretionary spending.

"We're planning prudently but confidently for the year ahead, on course to grow both profits and cashflow while carefully stepping back up to more normal investment levels," said chief executive Alex Baldock.

"Encouraged as we are by our progress, we know we can go further. For one thing, we expect artificial intelligence-powered technology to be the most exciting new product cycle since the tablet in 2010. With our partnerships, scale and expert colleagues to demystify AI, we're best-placed to benefit.

In the Nordics, consumer demand remained weak as inflation and interest rate rises impacted consumer confidence and drove a market decline of 3%. However, Currys grew market share and more than doubled profits, despite a headwind from currency translation.

UK & Ireland like-for-like sales fell 2%, with market share falling as the company continued to focus on more profitable sales which helped drive the rise in earnings.

The company in February this year rejected multiple approaches from the US investment group Elliott, which ultimately walked away from its final £742m offer after the Currys board said it "significantly undervalued the company and its future prospects".

Guy Lawson-Johns, equity analyst at Hargreaves Lansdown, said consumers had struggled to justify upgrading appliances, with demand for small electrical goods particularly affected, but an increase in UK consumer confidence, driven by rising economic optimism, suggested a recovery in discretionary spending "may be underway".

"Even a partial return to the longer-term growth trends Currys previously experienced could significantly benefit the group," he added.

"Importantly the Nordics have also shown some signs of life, sharing in the group's underlying profit growth. But while margins have improved, prolonged weakness in consumer demand will be on everyone's mind. A continued improvement will need to be seen to before management can say the recovery job is done."

Market Movers

techMARK (TASX) 4,739.97 -0.31%

FTSE 250 - Risers

Moonpig Group (MOON) 186.40p 17.38%

Watches of Switzerland Group (WOSG) 457.00p 14.42%

Serco Group (SRP) 178.20p 3.12%

Just Group (JUST) 106.60p 2.90%

Kier Group (KIE) 137.00p 2.85%

Trainline (TRN) 326.60p 2.64%

PureTech Health (PRTC) 192.40p 2.45%

Direct Line Insurance Group (DLG) 206.20p 2.38%

Keller Group (KLR) 1,250.00p 2.12%

Balfour Beatty (BBY) 368.80p 1.99%

FTSE 250 - Fallers

Aston Martin Lagonda Global Holdings (AML) 141.20p -6.30%

Currys (CURY) 72.15p -5.13%

Urban Logistics Reit (SHED) 118.00p -4.53%

W.A.G Payment Solutions (WPS) 62.40p -3.11%

SDCL Energy Efficiency Income Trust (SEIT) 67.10p -2.89%

AO World (AO.) 111.00p -2.80%

TR Property Inv Trust (TRY) 309.50p -2.67%

Hochschild Mining (HOC) 170.60p -2.63%

Energean (ENOG) 986.00p -2.47%

Sirius Real Estate Ltd. (SRE) 94.05p -2.23%