February 27, 2020 / 12:54 PM / a month ago

Watches of Switzerland sees shift to home buyers as coronavirus hits

ZURICH (Reuters) - The coronavirus is keeping Chinese tourists away from its London boutiques, British retailer Watches of Switzerland (WOSG.L) said on Thursday, but local demand for Rolex timepieces is so strong it is making up for the decline.

FILE PHOTO: The logo of of Watches of Switzerland is seen at a branch in London, Britain, May 30, 2019. REUTERS/Toby Melville

Tourists from China, where the virus originated in December, have traditionally been the biggest buyers of Swiss watches.

Chief Executive Brian Duffy said in the nine months since the company’s initial public offering the share of sales to Chinese nationals had fallen from around 10% to 7.8%.

“The impact of coronavirus and Chinese tourists not coming has been particularly sensed since the beginning of February,” he told Reuters.

“It obviously impacted Chinese New Year plans which are normally a spike in business.”

Demand for Swiss luxury watches has been under pressure recently, but Rolex is outperforming other brands, which helps Watches of Switzerland as the No.1 Rolex retailer in the UK.

Duffy said there was some evidence of brands shipping unsold stock from China to other markets.

“There will be stockbuilding because consumption clearly has reduced in China and a lot of Chinese-dependent markets, Hong Kong and Switzerland probably being the next obvious.”

Demand for Rolex, but also Patek Philippe and Audemars Piguet, was so strong there were actually supply constraints, he said.

“So if there’s a reduction in one consumer group, it’ll be to the benefit of others,” Duffy said, adding they’d not had any additional allocation of product yet.

Organisers of the Geneva watch fair said on Thursday they were cancelling their event due to the virus. The rival Baselworld show is still scheduled to take place from April 30.

Watches of Switzerland, which also owns Mappin & Webb, Goldsmiths and U.S.-based Mayors, reported like-for-like sales growth of 8.9% for the nine months to Jan 26. Duffy said he expected a similar growth rate for the full year.

A spokesman explained the slightly slower growth rate in the third quarter of 6.8% was mainly due to a Rolex price increase that had boosted growth in the first half of its fiscal year.

The group’s biggest shareholder, private equity firm Apollo Global Management, sold a stake worth 118.8 million pounds ($154.37 million) in the retailer last month, reducing its stake to 42.1%.

“It’s not their business holding major shareholdings in public companies so it’s a reasonable expectation they’d sell down over a period,” Duffy said.

Shares in the group were down around 1.2% at 1220 GMT.

Reporting by Silke Koltrowitz; Editing by Nick Macfie and David Evans

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