Watches of Switzerland shares crashed on Thursday after the luxury watch retailer said it had experienced ‘volatile trading’ during the key Christmas trading period and were reducing their revenue guidance as a result.

Watches of Switzerland (LON:WOSG) shares had cratered by over 28% at the time of writing on Thursday after reducing its revenue guidance for the year down to 1.53 – £1.55 billion from £1.65 – £1.70 billion.

The company is the UK’s largest luxury watch retailer and, for many, is the go-to outlet for leading brands such as Rolex, Patek Phillipe and Cartier.

Despite a positive start earlier this fiscal year, WOSG’s performance took a turn in the critical holiday season, as tough economic conditions weighed on luxury retail spending. The company now expects these challenges to persist through the end of the fiscal year.

WOSG continues seeing strong demand for its core brands in both the UK and US, with growing waitlists. Performance varied by market, with double-digit US growth but a more difficult UK market that impacted luxury watches and non-branded jewellery companies. Unusually high promotional deals were offered in non-branded jewellery.

Given the recent trading struggles and cautious outlook, WOSG management has revised full-year guidance for fiscal 2024 downward, assuming consumer demand will not recover. The new projections reflect discussions with key brands.

Currys shares were higher on Thursday after the electronics retailer said it had delivered robust profit “through stable gross margin and continued cost savings”.

Although group revenue was down 4% in Curry’s first half, the group said they now expected profit before tax to be higher than previous expectations at £105-115m.

Currys shares were up over 6% at the time of writing.

The company saw strength in its mobile sales which was slightly offset by slower sales of TVs and computers. Currys have honed in on the potential for higher margins from their customer services business and are enjoying ‘encouraging momentum’ in the area.

Currys said they are getting their Nordics business back on track as they prepare to dispose of their Greek business for £156m. The proceeds of the sale will be used to pay down debt as the company focuses on cash generation and managing costs.

“It’s no secret that Currys has had a hard time of late, and the group’s likely been praying for a Christmas miracle in the form of a boost to sales. But it looks like the group didn’t make its wish under a shooting star as sales across all regions continued to decline, in what should be peak business months for Currys,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“Part of this comes down to the fact that consumers are simply struggling to justify as much discretionary spending on TVs, laptops and gadgets amidst the ongoing cost-of-living pressures. Record credit adoption in the UK suggests customers really are finding it harder to afford a lot of the big-ticket items that Currys sells. And in the Nordics region, the group’s second-largest segment, the market remains extremely tough.”

London’s leading index was dealt a heavy blow on Wednesday as UK CPI inflation unexpectedly rose in December, throwing the timing of the UK’s first rate cut after an extended hiking cycle up in the air.

The FTSE 100 was down 1.6% at the time of writing.

UK investors were reminded that interest rates may stay higher for a prolonged period after UK CPI unexpectedly rose to 4% in December from 3.9% in the month prior.

“Frustration is in the air as UK inflation continues to prove stubborn. The slight rise in the headline rate to 4% is the last move companies and households wanted to see, as it pushes the prospect of interest rate cuts further down the line,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

The reading will be a real headache for the Bank of England, which is under increasing pressure to lower borrowing costs to avoid a UK recession.

As inflation dipped last year, markets were quick to price in UK interest rate cuts early in 2024. Today, this positioning unwound as investors assessed data suggesting the Bank of England would not cut rates for the first time until later in the year.

“Investors have had to rip up their game plan after UK inflation went in the wrong direction to support the narrative for interest rate cuts,” said Russ Mould, investment director at AJ Bell.

“Coming at 4% versus a market forecast of 3.8%, it’s still double the long-term target for the Bank of England and could act as the deciding factor for the Monetary Policy Committee to sit on their hands at their next vote and keep rates higher for longer.

This morning’s UK inflation data follows several comments by European central bankers warning markets not to expect too many rate cuts in Europe in 2024.

US CPI inflation has also recently come in hotter than expected.

Interest rate-sensitive sectors

As expected, Interest rate-sensitive sectors were among the biggest losers on Wednesday.

Housebuilders were at the forefront of the rally at the end of last year, inspired by hopes of interest rate cuts. However, Taylor Wimpey, Barratt Developments, Berkeley Group Holdings, and Persimmon sank between 2% and 4.7% on Wednesday as the thesis for last year’s rally diminished. 

Although interest rate-sensitive sectors led the declines, the FTSE 100’s sell-off was broad. Just six of the 100 constituents were positive at the time of writing.

Real Estate Investment Trusts were among the worst performers, with Land Securities and Unite Group taking a beating.

Just a day after Ocado rallied on strong results for their retail arm, the company once more displayed its tech stock attributes. Higher interest rates are generally seen as bearish for fast-growing technology stocks and bring their lofty valuations into question. 

BP has appointed Murray Auchincloss as their new CEO four months after Bernard Looney left his position following the discovery of undisclosed relationships with staff.

The new CEO comes in at a time when BP is under increased pressure to push forward with its green agenda and a generally difficult time for the FTSE 100 company.

Auchincloss will have to contend with subdued oil prices and a poor valuation compared to US peers.

“The decision to appoint Murray Auchincloss as chief executive of BP on a permanent basis was greeted with the shrug it deserved by the market,” said Russ Mould, investment director at AJ Bell.

“There will be some disappointment about the failure to appoint an external candidate for the first time in its history to shake things up and revive a business which has trailed behind its US counterparts in recent years.

“Mr Auchincloss is a continuity candidate, in that he was on the board as CFO under Bernard Looney when the oil major drew up its plan to retreat more rapidly from hydrocarbons than its industry peers, and that he was appointed interim CEO when Mr Looney was sacked. As such, the board must be happy with this strategy, even if it was subsequently refined and the pace of the switch toward renewables and away from oil and gas was slowed down, and the idea is presumably that Mr Auchincloss can continue to implement it.”

Mould continued to explain that the new CEO has a job on their hands to impress investors after a period of relative underperformance versus peers.

“Investors have, thus far, been less pleased than the board, given how BP’s shares underperformed those of Shell as well as its American and European peers during Mr Looney’s tenure. Nevertheless, they may welcome some degree of calm in the company’s boardroom, given that three of its past four CEOs did not depart at a time of their choosing.

“Mr Auchincloss will still be expected to put his own stamp on the business and will get his first opportunity to introduce himself to the market properly with the company’s full year and fourth quarter results on 6 February.”

Ibstock shares were slightly weaker on Wednesday after the company announced a 21% drop in full-year revenue to £405m.

The brickmaker has been dogged by slow demand from the residential sector amid a drop in new home sales.

Ibstock will hope the worst is behind them. However, by their own admission, the market remains highly uncertain, and cost inflation persists. 

That said, trading has been in line with management’s expectations, and analysts suggest 2024 could be the year the industry turns around and supports higher revenue for the group.

Although shares were down 3% at the time of writing on Wednesday, the stock has had a good run since the lows towards the end of last year.

UK Investor Magazine published an article titled ‘Ibstock: start buying the brick maker in preparation for the UK property recovery’ in September last year.

We wrote:

Indeed, for all the gloom attached to the UK housing market, Ibstock’s performance in 2023 hasn’t been that bad. 

In the first half of 2023, the brickmaker generated more revenues of £223m, only 14% down on the same period last year.

Things may get worse in the second half, but with the stock trading at 6.4x historical earnings, there is plenty of wiggle room for a long-term hold.

Things did get worse in the second half, but the forward-looking nature of the markets coupled with deep value in Ibstock shares sent the stock higher into the new year.

Despite the challenges faced by the industry, Ibstock remains a cyclical play for the UK property recovery. The company is taking measures to reduce costs, which will result in a leaner business when the market improves.

“It’s no real surprise to see Ibstock wrestling against the struggles of a housing market slowdown. Residential volumes have dropped significantly in 2023, and the group expects business to remain subdued over the near term,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“To combat the challenging market backdrop, Ibstock reduced headcount and pulled back on production, carefully matching supply with demand to try and avoid a build-up of inventory. This involved the permanent closure of the group’s brick factory in Surrey, which will cost the group around £20mn over the current and prior year. This isn’t great news and raises questions about the group’s ability to ramp up production quickly when the market turns. In the meantime, cost-cutting measures remain the key route to protecting group margins.”

“There are some very early signs the worst may be behind Ibstock now. Cost inflation appears to have eased and the fact that lenders are becoming more competitive on mortgage rates is a major positive for homebuyers, which ultimately feeds through to increased demand for Ibstock’s products.”