The rich are still spending money despite the rising cost of living, judging by Watches of Switzerland’s latest update.
Rising energy and food prices matter to lower income individuals because the extra costs are, in many cases, absorbing all the money previously left over on pay day. Yet for affluent people, inflation won’t massively change their lifestyle and so luxury goods continue to sell well.
Watches of Switzerland’s US sales have doubled year-on-year in its most recent quarter, suggesting that inflationary pressures are being shrugged off by its clientele.
“The company seems very upbeat, rolling out more showrooms or upgrading existing ones, and it is making good progress with its expansion into Continental Europe,” AJ Bell financial analyst Danni Hewson said.
“So far so good, yet there is one negative factor to consider – luxury watch prices on the secondary market are falling. While there is a risk that trend spreads into the primary market where Watches of Switzerland operates, so far there is no evidence of a dip in demand.
“Retailers continue to have long waiting lists for new models, with demand outweighing supply.
“One of the key attractions for premium watches is that they are seen to be a good investment as editions are limited and there are plenty of people who want to own them. If second-hand prices are falling, however, that dilutes the appeal of luxury watches from an investment perspective. It’s something to keep an eye on, particularly if second-hand prices for luxury watches fall below retail prices. Although reports suggest we’re a long way off that happening just yet.”