(Alliance News) - Watches of Switzerland Group PLC on Thursday backed full-year guidance, although half-year profit dropped, as it flagged an encouraging start to third quarter trading.

The Leicester, England-based watch retailer said pretax profit fell 40% to GBP40.5 million in the 26 weeks to October 27 from GBP66.5 million a year prior.

Revenue rose 3.1% to GBP784.8 million from GBP761.4 million.

Within this, US revenue increased by 11% at constant currency to GBP355 million. This reflected a sequential improvement to 24% growth in the second quarter after a 1% drop in the first.

UK & Europe revenue of GBP430 million was down 1% on-year. Sequentially, revenue improved from a fall of 4% in the first quarter to growth of 2% in the second.

The firm noted a "continued stabilisation" of the UK market in both luxury watches and jewellery, following a period of "volatile conditions" in the prior financial year.

Sales of luxury watches fell 3.1% to GBP649 million from GBP670 million but luxury jewellery sales more than doubled to GBP95 million from GBP47 million.

Chief Executive Brian Duffy said the results reflected an "encouraging improvement in trading in [the second quarter], driven by growing demand in the UK and US, and consistent growth in client registration lists, along with the acquisition of Roberto Coin in the period."

He explained the firm used the first quarter to rebuild stock levels reflected in the second quarter improvement.

"Price increases from brands in the half have been modest, and this has also positively influenced consumer sentiment," he added.

In response, shares in Watches of Switzerland rose 12% to 559.50 pence each in London on Thursday morning.

Duffy said the newly acquired Roberto Coin business in North America has traded "strongly" since acquisition and is now making a good contribution.

Integration is progressing well, and growth plans are underway, he added.

Watches of Switzerland completed the GBP130 million acquisition in May. It bought the business from Roberto Coin Spa, Pilar Coin and Peter Webster, co-founder of Roberto Coin Inc.

Duffy said the third quarter trading has "started encouragingly".

"Our trading momentum through November, visibility of intake and second half opening of large showroom investments support our full year guidance, which is unchanged," he stated.

The firm expects full-year revenue between GBP1.67 billion to GBP1.73 billion, would be growth of as much as 12% from GBP1.54 billion a year prior.

By Jeremy Cutler, Alliance News reporter

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