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Why this FTSE 250 stock rose 132% in 2021

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  • WOSGF
Trader on video call from his home office
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Shares in the FTSE 250 retailer Watches of Switzerland (LSE: WOSG) jumped 132% in 2021. Following this performance, the stock is trading at some of its highest ever levels.

Indeed, as the coronavirus pandemic spread worldwide in 2020 and retailers were forced to shut their doors to control the spread, the stock slumped to 179p, from 390p, at the beginning of 2020.

However, after hitting this all-time low, shares in the retailer have rallied a staggering 670% since the beginning of April 2020.

FTSE 250 retailer profits

Since the beginning of the pandemic, the retailer’s profits have jumped higher. Early in August 2020, the organisation published its numbers for the financial year ending 26 April 2020. The company posted sales of £798m for the 46 weeks to 15 March 2020. Sales then plunged to just £12.8m in the six weeks to 26 April. Overall, sales during the first six weeks of the world’s fight against the virus slumped 85%.

As the world started to open up, the company’s sales also began to recover. Revenues surpassed management expectations for the first quarter of its 2021 financial year. Total group sales were down just 28% year-on-year. That was a notable improvement on the trading performance reported at the beginning of the pandemic.

Shares in the FTSE 250 corporation started to head higher as it reported successive positive updates. In its half-year results for the 2021 financial year, the firm reported revenues of £414m, down just 2.6%.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 27% compared to the prior-year period. Even though sporadic store closures beset the group during the period, EBITDA profits still rose, thanks to higher online sales and sales of higher-margin items.

For 2021, the company reported overall revenue growth of 13.3% and EBITDA growth of 35%. Luxury watch sales were a significant driver for the business. Sales of high-value watches jumped 16% for the year.

Growth plan

After these numbers were published, the company introduced its long-term growth plan for the next five years. Management wants to develop and reinforce the group’s sector-leading position in the UK luxury watch market. It also wants to become the “clear leader” in the US market, alongside building a strong presence in Europe.

The group anticipates its US revenue will grow at a compound annual rate of 25-30% over the next five years. Meanwhile, in its home market, the FTSE 250 retailer thinks the jewellery and luxury watches market will expand at a compound annual rate of 8-10% over the next five years.

The enterprise hopes to be able to capitalise on this expansion by investing in and expanding its existing footprint in these markets. The company will also develop its e-commerce offer to reach more consumers and provide a better online experience.

This growth potential seems to be one of the main drivers behind the recent share price performance.

The post Why this FTSE 250 stock rose 132% in 2021 appeared first on The Motley Fool UK.

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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2022

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