Thank you, Harry, and good morning, everyone. Welcome to our call, and thanks for joining us. I am Brian Duffy, the CEO of the Watches of Switzerland Group, and I'll be adding some further commentary to the Q3, fiscal 2023 trading announcement that we made this morning. Bill, our CFO will then add some comments, and then we'll both be happy to take your questions. I'm very pleased with our strong performance in Q3, delivering sales growth of 17% and reported 12% constant currency. That's in line with how we had guided to the quarter and the half year. Sales growth in the U.S. remained very strong at +36% reported, +22% in constant currency. U.K., Europe sales were also very good at +7%.
Q3, which includes the holiday Christmas season, is the most traffic dependent and competitive quarter for our group. I'm really delighted with the outcome. Our model prevailed, and our teams once again excelled. When we reported our Q1 and Q2 figures, we said that there was potential for more challenging trading conditions in the second half due to cost of living pressures, interest rate increases and so on, all impacting consumer confidence and sentiment. Looking at Q3, the macro backdrop has been more challenging as we expected. However, despite these conditions, we've continued to trade very strongly, and we exited the third quarter with good momentum. Luxury watches grew 22%, and our market information shows that we've once again gained share both in the U.K. and the U.S.
Growth was driven by both increases in average selling price as well as volume. Demand for luxury watches continues to outpace supply. We have added to the net registration lists at the same rate as we've done in recent quarters in both the U.K. and the U.S. We receive weekly anecdotal feedback from our stores, and they continue to report definitely good conversion levels from the wait list clients. Our stores report that there has been some incidence in recent weeks of some customers deferring buying opportunities within a very small assortment of products that they have recently added to the registration lists. However, as I say, conversion remains good and the lists overall are growing. Luxury jewelry was down 2%.
That reflects our focus on full price sales, which has been our strategy ongoing. Overall, our ASP increased high single digit as we merchandise to higher price points and reduced promotional activity in the U.K. and discounts in the U.S. Group eCom sales at +5% were very good and ahead of market trends. We also enjoyed strong sales growth in pre-owned products, both in the U.K. and U.S., with continued good margins, no pressure on pricing. We are preparing for and looking forward to the introduction of the Rolex CPO program sometime later in this calendar year. We continue our expansion into Europe, our new stores in Stockholm and Copenhagen are doing well and trading in line with our expectations. Consumers in these markets are responding well to elevated showroom environments and client service.
We're really pleased with the flagship Watches of Switzerland showroom, plus the four monobrand boutiques that we opened in the Battersea Power Station. In October, we are delivering overall good performance. We have an exciting pipeline going forward of new showroom openings, including the American Dream in New Jersey and the flagship Rolex boutique on Bond Street, and a full program of showroom refurbishments. Since we last spoke to you about the results in December, we now have a greater visibility of supply for the calendar year and obviously the price increases that have been announced for January, February. Taking all that together, we are pleased to confirm our previously issued guidance for the year.
Remain confident in our markets and the competitive advantages of our business model and remain committed to and confident in our long-range plan objectives. With that, I'll hand over to Bill.
Thanks, Brian. Morning, everyone. Just a couple of extra bits of color from me on the guidance. This is now at an exchange rate of $1.24 to sterling, which is the rate at the end of the quarter. A little bit of a headwind compared to the $1.20 we previously had. Revenue still between GBP 1.5 billion-GBP 1.55 billion, EBITA GBP 163 million-GBP 165 million, and on free cash conversion, maintaining the 70% guidance that we gave at the half year with inventory levels coming down in the quarter in line with the seasonal pattern. Harry, over to you for Q&A.
Thank you very much. If you would like to ask a question, please use the, sorry, please dial star one on your telephone keypad. If you change your mind, please dial star two. When preparing to ask your question, please ensure your phone is unmuted locally. Our first question of the day is from the line of Antoine Belge, BNP Paribas. Antoine, please go ahead.
Yes. Hello. Good morning again. It's Antoine Belge, BNP Paribas, Exane. Three question, if I may. First of all, can you comment a bit on current trading and maybe for the key regions? Also, overall, would you say that you are more confident or less confident compared to last time we spoke in December? Point number two, in terms of, you know, the mechanics of the waiting list and, you know, what are you seeing there, you know, different patterns or attitude of consumers.
Point number three, with regards to, you know, what you see in Q3 and the start of Q4, and any comment on some of the moving parts of the profitability of the company. Thank you.
Okay. Yeah, thanks. You know, we are only just into our quarter. We had said that we exited the quarter strongly. We entered Q4 strongly. We are not more or less confident. We're confirming our guidance. There obviously is less time to go. We're really not seeing a change. I guess it's worth just pointing out, you know, the second half, Q3, Q4. Q3 is the quarter that's sort of one that you would see that you would have had more potential volatility in with the Christmas season. It's more competitive. Jewelry is not a big part of our total business at 8%, but it's a bigger proportion during Christmas.
You know, looking at the second half year, Q3 was likely to be the most volatile, potentially. I do think it was at a time as well when, you know, market sentiment or economic sentiment was pretty negative. Very, very pleased at Q3 and, you know, we're very confident and comfortable at the guidance that we've given for the year. Not more or less confident, but, obviously with less time to go, we have, you know, a very good feeling about the year overall. In terms of waiting list, there isn't really any change in attitude. The fact that I commented on, you know, some customers deferring is just really, you know, full transparency.
We're regularly asked, has there been any change at all? You know, anecdotally, a few customers on a few products that were recently added to the list. Nobody's wanting to come off the list, by the way. They're simply saying, "I still want the product, but, can you give me a call in, you know, a month or six weeks' time?" We go to the next customer who then buys. We're increasing our lists, U.K., U.S.. Really we're not seeing any significant change at all overall. The moving parts on profitability.
Morning, Antoine. On the profitability, no material changes. The most meaningful headwind is the interest-free credit cost, not in terms of the volume of people taking up interest-free credit. That's in line with normal levels. The interest rates going up increases the cost of that for us. That's the most meaningful thing in there. Elsewhere, we've got a bit of inflation in things like IT costs. Overall, no meaningful changes in profitability.
Okay. Just maybe a follow-up on the there's been a few, you know, price increases for the main brands. I mean, is it pretty neutral for you because your purchasing price has also been adjusted? Is it, you know, having a slight impact?
It's, it is beneficial for us. We operate on fixed margins with the brands. As the wholesale price goes up, the RRP goes up by the same amount. What we have got going against us is the FX headwind. It's marginally positive for us, but not meaningful.
Thank you very much.
Our next question is from the line of Kathryn Parker. Kathryn, please go ahead now.
Good morning, and thank you for taking my questions. My first question is on brand performance and whether you've seen any changes in relative brand performance outside of the super high demand brands. My second question is on Rolex supply. I believe you have been given your allocations for this year. And I wondered if those were aligned to your expectations. And then thirdly, just on the U.S. growth numbers. There's been a slight deceleration in the growth ex acquisitions, and I just wondered if you could comment on any reasons for that. Thank you.
Thanks, Kathryn. Brand performance, something that's really characterized this last couple of years. There's been an overall strength of the luxury watch world, which we think is very, very positive. There are, you know, a lot of brands doing fantastically well for us, Cartier, OMEGA, other, you know, major global brands, TUDOR's doing fantastically well. In addition, you know, what you'd gather is smaller brands have had a very good period as well. Some niche brands like MB&F, H. Moser, Girard-Perregaux. There's been a really good spread of business and nothing's really changed over the year. I think it really talks to the strength of the category overall. Obviously we represent pretty much everybody in the industry.
Any, any brand changes that we have experienced are down to, you know, things like, you know, supply or, you know, anniversarying of, new introductions or whatever this year versus last year. Nothing to do at all with the overall demand for the brands which are, as I say, has been very strong. The Rolex, so I, everybody, or most people that follow us know we do get a number at the start of the year in terms of units, for the Rolex U.K. and U.S., we've had those meetings that take place in January. Those numbers are never missed in our experience, you know, ever go upwards. They were in line with our expectation.
You know, no issue for us there and obviously helps, you know, underpin the balance of the year guidance that we're giving. U.S., as far as we’re concerned , was very strong. We're doing very well. There's some things that, you know, impact our net sales that don't necessarily reflect consumer demand overall, the timing of supplies, the management of stock levels. You know, for example, we did increase stock levels in store in conjunction with Rolex just simply to get a better consumer experience. There's things like that that impact our sales overall. When we look at a quarter, you know, compared to two years ago, it was +76% in the U.S., excluding acquisitions +50%.
It was exactly in line with where we, you know, guided that it would have been our forecast that it would have been. U.S. is still very, very strong, getting great support from all of the brands, getting a really good level of investment in the market from the brands and from retailers. We see it was a strong quarter as part of what's been a really strong year-to-date market performance.
Great. Thank you very much.
Our next question is from the line of Daria Nasledysheva of Bank of America. Daria, please go ahead now.
Hi, Brian. Hi, Bill. Thank you for taking my questions. I have three. The first one would be could you please help us quantify the, a bit of a weakness in the U.S. between weakness comps in jewelry versus performance of watches? Can you please remind us what percentage of your U.S. sales actually come from jewelry? Also, are you starting to see any discounting in the watch channel today versus what we have been seeing over the past couple of years? Obviously, the discounts broadly in the wholesale channel have been narrowing and generally disappearing. Has it changed now? A bit more sequentially, within the quarter, how does January trading compare to November, December? If you could give us a bit of color on that. Thanks a lot.
Daria, not in the order that you asked, I'll answer. No discounting at all. We don't discount luxury watches, and we don't see any pressure on that at all, either from us or, you know, others in the market. We haven't split out jewelry by market overall. With regards to the U.S., there was that has been historically a tendency of an element of discounting. We experienced it when we acquired Mayors and eliminated it pretty quickly. We've now acquired Betteridge, and we're going through the same process. Our whole positioning is to eliminate discounting. We're doing that and getting a really good response overall.
We've never given the split of jewelry and watches. Overall, both markets in the U.S. are good. You know, with regards to jewelry, as I said, we've got a different positioning from a strategic standpoint. We commented that we exited the quarter strongly. So that, you know, that gives you an indication of January. Obviously, the biggest part of the quarter and the most volatile part of it is the holiday season. We're pleased overall with how we managed to perform during that.
Thank you.
Yep.
Thank you. As a reminder, if you'd like to ask a question, please dial star one on your telephone keypad now. Our next question is from the line of Richard Taylor of Barclays. Please go ahead now.
Yeah. Morning, all. I've got three questions, please. Can you give us some color on the jewelry split as a percentage of revenue in Q3? I realize it's higher given the Christmas gifting, but to know the Q3, the rough Q3 split versus a typical quarter would be useful. Secondly, given your comments on focusing on full price sales on jewelry, can you comment on how margins performed in the quarter, please, versus your expectations? Finally, any comments on the M&A pipeline will be welcome for US and Europe. Thank you.
Bill will give you the split. Yeah.
Richard, on jewelry, it's in Q3, it's 10% of the business to jewelry. In the year on average, it's 7%-8%. It ticks up for the holiday season for fairly obvious reasons. We'd expect it to be the normal proportion going through the rest of the year.
We have improved margins on jewelry, particularly in the U.S., as I said in answer to the previous question. You know, eliminating any element of discounting, we have improved margins exactly as planned. I'm sorry, what was the third question, Richard? Sorry.
M&A, please.
Oh, M&A. Yes. We remain as active as we've been in the U.S. and Europe. We've always said these, you know, these deals aren't, you know, over till they're over. We get at various stages of discussion. You know, we never give any speculative element in our guidance. So we remain as active. It remains a key part of our strategy. It's a key part of our long range plan in both U.S. and Europe. Nothing's changed. As soon as we have anything done and dusted, you know, obviously, the market will hear about it.
Okay. Thank you.
Thank you. Our next question is from the line of Natasha Brilliant of Credit Suisse. Natasha, please go ahead.
Hi. Thank you. Good morning. Three questions from me as well, please. Just on back to the wait lists, you said there's been some examples of deferral. Can you give us just a bit more color on these customers? What sort of products or price points they're looking at? I think you said there are recent additions to the wait list, so if they're getting the call already, does that suggest it's not the most supply constrained watches? The first question. Second question, just if you can tell us what the overlap is between customers buying both watches and jewelry. In the short term, if customers are price driven and are perhaps shopping elsewhere for jewelry, is there any risk to the non-supply constrained watch sales? Last question, you mentioned the Rolex certification program for pre-owned watches.
Can you just tell us a bit more about what the opportunity might be for you, in that context? Thank you.
On the wait list, as I've said, it's just in the interest of full transparency that I've made the comment. We get asked all the time, is there any change? There is this very small change of some customers deferring. They are the products that were most recently added to the list. I think everybody knows with Rolex, you know, there's been this succession that the steel Professional products or Daytonas and Submariners and that have always been on waiting lists and then all other Professionals then, steel product and so on. The last category that went onto waiting lists was typically a ladies product. As the products that went most recently on the waiting list are the ones that the guys are making one or two calls about.
Just to emphasize, every product that goes in the store is out of the store in very short order. I just certainly for, again, full transparency, wanted to say there's been that very small, slight change that's been reported by some of our stores. On watch and jewelry overlap, it's not a big deal at all. Here in the U.K. particularly, not, in the U.S., you know, we have some great jewelry businesses, great jewelry clients, and they, you know, the clients from time to time would be buying watches as well. It isn't really a big deal of, we just have some great client relations that we sell, you know, the full assortment of products.
There's no negative impact there at all of jewelry overlap in watches. CPO, we're very positive about the principle and the program and what Rolex has done to organize, bring in, I think, discipline and control and confidence to the category by introducing this certified program only available to authorized retailers like us. We think it could be very big, but there needs to be a scaling up of the capacity for servicing and refurbishing and authenticating product between Rolex and ourselves. That will determine, I think, the pace and the extent of the growth. We're still working through that detail.
We expect to be, you know, fully operating as an authorized CPO seller for Rolex sometime later in this calendar year.
Thank you.
Thank you. Our next question is from the line of Samson Edmunds of Redburn. Samson, please go ahead.
Yeah, good morning. Just a quick question. You make a reference in the statement to not having seen much recovery in the tourist business in the U.K., which is, I find slightly surprising given where currency was, and for the U.S. travelers. Just wondering if you could flesh that out a bit and also your thoughts as we go through the year in terms of, you know, potential return of Chinese consumers, and where that business stands relative to kind of pre-COVID levels and what you've assumed in the guidance, revenue guidance in terms of recovery in that business. Thank you.
You know, a good question, Samson. We obviously have a situation in the U.K. of no duty free shopping. We can see very clearly, and we know and we hear it from all the brands, the evidence that tourism has recovered, but it's particularly recovered in the EU. The big groups that have been traveling and buying are Americans and Middle East clients. We know they're choosing to buy, you know, in Paris and Frankfurt and Munich rather than buying here in the U.K. because of the fact that we're not offering VAT. For that reason, we think more than any other one, we think that, you know, it hasn't been a big deal to date.
Until the VAT situation's resolved, we are not really including any significant return of tourism in any of the numbers that we're guiding to. The Chinese business historically for us over a year pre-pandemic, pre-Brexit, the Chinese business was 7% of our total group. It's been nothing since, and we've been totally domestic in our sales. Around 97% of our sales, U.K. and U.S., have been for domestic clients. Once again, you know, the Chinese tourist does plan their itinerary with their shopping in mind, and without any doubt, they'll plan to spend more time in European cities than the U.K. because of the VAT situation. Some will come, of course, and some will shop, of course. But we haven't really included anything.
You know, of that, increment in our, in our guidance at this point.
Thank you.
Thank you very much. As a final reminder, if you would like to ask questions today, please dial star one on your telephone keypad now. Our next question is from the line of Kate Calvert of Investec. Please go ahead now.
Morning, everyone. Just two from me. The first one is, can you give some thoughts on the number of monobrand openings in FY 2024 you expect to do in the U.K. and the U.S.? The second question is just coming back to the certification of Rolex pre-owned watches. Are you yourselves going to be, certifying those for Rolex?
Yeah. We haven't given the number yet for fiscal year 2024. We'll do it a quarter from now when we do our year-end update as usual. You know, monobrands remain, you know, a part of our strategy, U.K., U.S., and Europe, and we have good momentum and good pipeline and a good discussion of opportunities going on with our brand partners. The CPO question was.
Are we doing the certification or?
Initially, and for the foreseeable, Rolex will do the authentication and refurbishment in the U.K. We'll look at like they might be able to do it slightly differently in the U.S., but they'd be doing the refurb, they'd be doing the authentication. Watch, of course, are offering a guarantee on the product. So, so quite rightly they're seeing every product. Yes, that's how it will be initially. That's why I'd said, you know, in answer to an earlier question, we are just working through the logistics of the capacity, the volume throughput and so on. There'll be no issue here at all with demand is our view, and the business will be whatever logistically we can manage through all those processes and get out into our stores. That's how it's starting out.
Okay, thanks so much.
Thank you. We have no further questions in the queue today, so I'd like to hand back to Brian Duffy for any further remarks.
Thanks, Harry. Thanks, everybody, for for your questions and for joining us. Summary, we really are pleased with our strong performance in Q3. Remain confident in our fiscal year 2023 guidance. We're also going forward, see the economic outlook as more positive. I think the second half year of the calendar year will certainly be greater overall. Our brand partners continue to invest product development and marketing. We continue to invest in retail as does others. We think the category is in great shape. Our team are doing fantastically well. We're all looking forward to Watches and Wonders in March. We think it'll be a very positive watch fair all round.
As I say, happy with the quarter and happy with where we're headed for the year. A big thanks to all of our teams. Thank you.
This concludes today's call. Thank you all for joining. You may now disconnect your lines.