Over the past 18 months, the market has taken the view that Watches of Switzerland is one of those companies which could not sustain the high levels of growth seen during the pandemic where many people splashed the cash because they were bored and stuck at home.
The company continued to argue that the high level of success was not a one-off, and that it reflected a structural shift in the market whereby more people were collecting watches as well as the benefits of expanding geographically.
AJ Bell’s Russ Mould said: “Its latest update finally shows that cracks are appearing, hence why the share price has taken a dive.
“In its defence, demand continues to exceed supply. What’s spooked investors is guidance for much slower growth in the new financial year as it flags that more challenging conditions may continue for the near-term.
“There will always be ups and downs with businesses and there is nothing in the latest update to suggest major problems within Watches of Switzerland. It’s simply a reset of growth expectations which has understandably caused the share price to correct.
“The trouble is that investors have seen other pandemic retail winners fall flat on their face over the past few years and they might worry that Watches of Switzerland’s latest update could be the first in a series of setbacks. The pressure is on for the business to deliver and not be put on the scrapheap along with the online fashion retailers who suffered an almighty post-pandemic hangover.”
