Watches of Switzerland Group PLC

LSE:WOSG

Earnings Call Transcript 2021-Q1

[Hugh Brian Duffy, CEO & Director]

So good morning, everyone. Welcome to Watches of Switzerland financial presentation. my name is Brian Duffy. I'm the CEO of the group, and we're going to be presenting today our final results for fiscal year '20; our trading update on the first quarter of fiscal year '21, which has just ended; and then our guidance for the full year fiscal '21, which we've just formed. Delighted to be joined by 3 of my colleagues today who will be joining me making this presentation. We, first of all have, Craig Bolton. Craig is our Executive Director responsible for the U.K. business. We have David Hurley joining us from the U.S. David is our Executive Vice President responsible for the U.S. business. And then we have our Chief Financial Officer who many of you recognize and know, Anders Romberg, who'll be taking us through numbers and guidance as we go through.Just before we go to the slides, I'll just make a couple of introductory and I think important comments. We're very pleased with our performance, both for the fiscal year and for the first quarter of this new fiscal year. I think we're proving just what a great category that we're fortunate enough to be in of the world of luxury Swiss watches. It's a very, very resilient category. And clearly, within that category, our model is working well throughout this period. I think, very importantly, our multichannel approach where we have a great combination of fabulous stores with great teams which we complement with our online business and support the whole thing with tremendous marketing, particularly digital marketing. So we're very happy in these unusual circumstances, what we've achieved, and I hope you feel the same when we go through our presentation here.So looking at the first slide, FY '20. Our strategy, obviously, is working where we're having a tremendously strong period leading into when lockdown happened in mid-March. It was week 46 of our financial year. Very strong in the U.K., gaining share, doing well. We are particularly chuffed about how well we were doing in the U.S. We haven't been there a long time, but I think it's a great performance. We were delivering 35% year-on-year growth in the U.S., really showed the success of our strategy. It was very broad-based. Our acquisitions at Mayors and Wynn, working very well. Our new builds in New York, working well. The team doing a fantastic job overall. So in such a short time to have this strong momentum in the U.S., we feel, is a great accomplishment by David and his team over there.We have gained market share, as I'll show you, both in the U.K. and in the U.S. Our marketing is really working. We've attached to the appendix of our reports some market research information that shows the progress that we've made and awareness in the U.K. and the amazing awareness that we've established in New York in such a short time. So great stuff, but obviously along came COVID that really influenced all business and all of our lives. Despite that, 6 weeks of lockdown, we still actually produced record results overall. Our sales before adjustment, our sales were up 5.9%, which is comparable. Our EBIT was up 7.8%, and we're now reporting a ROCE calculation, which year-on-year showed a progress of 110 basis points. So happy that performing well in all of those financial KPIs.In terms of market share, in the U.K., we measure that we've made a 200 basis point improvement in our market share, taking is up to 37.2%. So actually an acceleration of market share gain from what we've done on average over the previous 5 years. E-com, we even were ahead of that, 330 basis points improvement in e-com to give us a share of 43.7%. These numbers are all calendar '19, but we would add that in the first half of calendar '20, e-com business actually increased our market share of 48%, so almost half of the market, and I think we believe has progressed even since then. In the U.S., our market share went from 6.8%, 120 bps up, to 8%. I'd just point out the obvious that we're obviously not present in all of the U.S. These are national statistics, and we enjoy a bigger share where we are in Florida, Georgia, New York and Nevada.So lockdown, totally unprecedented circumstances for us all, I know, but I think our teams and our business really responded very, very well to these unusual circumstances. We're very active in clienteling. We have long waiting lists. We have a great database of clients, and we were able to reach out to these clients, keep engaged with them and even take preorders for when we're reopening, so very productive and very positive interactions. E-com, clearly, the market moved in favor of e-com. And we didn't just sit back and accept that. We actually got behind e-com, spent more money on marketing and driving our presence and market share there. We stepped up our engagement with our brand partners and who we depend for our business, particularly around new products. And there was a lot of activity and new product launches that Craig will mention more in his presentation, but we took the opportunity of engaging both on the introduction of the new products and the plans to bring the products to market in the balance of the year.Digital, well, obviously, was key. And clearly, we've got great resources, great experience on digital. And it really come into its own as a medium during these unusual circumstances and great impact from that. We are doing everything virtual, of course, interacting with our teams, interacting with one another but also interacting with the consumer base out there. The image that I have on this slide here that you can see is us introducing a new exclusive product, and we have on screen there a presentation from London, Tokyo and New York as we presented to a good number of press in the U.S. Then our teams were really inspirational during this time. We loaded up a lot more training opportunities on our new e-learning platform, and our teams really just gobbled them up. They were learning everything about what they sell and even learning about brands that they don't sell, just to improve the education and great response. We also had a lot of social interactions with our team, keeping everybody communicating with one another. We had a virtual pub in which we had quiz nights and gigs and all kinds of fun. And we kept the team continually up to date with our view of what's happening with our business. We were really delighted from the beginning. We said to our team, we want to keep everybody employed. We want to keep everybody fully paid, and we hope we'll be able to do that. And we're delighted at the end of lockdown to confirm that. In fact, that's what we did for all of our teams. And we were preparing for reopening almost from the day that we closed, and we knew it was going to be very different on reopening, and we wanted to get ahead of the game. And we really were ready to reopen a month before we're eventually able to do it. All that preparation and training, I think, put us in a great position for the reopening when it came. And on this chart, we're looking at our sales performance for the first quarter. May, as you can see, we are more or less closed, and then we started opening progressively, end of May through June. U.K. was mid-June, and July before we got most of our store network open.So what we've done, just to help you understand the performance. First of all, we're showing here our sales by month, U.K. and U.S. separately. We've also done a calculation of saying had we been opened for all of the hours that would have recognized normal opening, what would it have been, what would be when we're actually open. So in the case of the U.K., we're saying in June, we were only opened 34% of the hours that would otherwise have been available, 78% in July. And if you look overall, in total, 10%, May; 40%, June; 74% in July. And our total group was effectively open for 38% of the quarter.Then traffic was down, on average, probably 50% since the reopening, so only open 38% of the time with 50% of the traffic. And given those conditions to be delivering our sales performance, is only 27% down. And in fact, showing growth for the months of June and July, we think, is extraordinarily good. Obviously, e-commerce performed well during that time and actually in the month of May when we're fully locked down, 118%, and then gradually reducing as the stores opened. But for the quarter overall, up 79%. Our debt, I'll mention, too, below GBP 100 million, down to GBP 91 million overall, and our finance team clearly did a great job of managing cash during this period. This next chart, we're comparing the makeup of our sales quarter 1 '21 against quarter 1 '20, and it's pretty remarkable. Quarter 1 is when we have most of our tourist business for the year. And if you look at quarter 1 fiscal year '20, 33% of our sales came from the combination of tourism and airport traffic, which had all but disappeared in the last quarter that we're looking at only 3%. So we went from 33% to 3% from those segments, but our domestic business effectively filled the balance overall, particularly domestic business in the U.K. and particularly our regional domestic business in the U.K. So just proving, as we've presented continually, that we're very much in a supply-driven business, and demand continues to significantly exceed supply. So we're able to move the product around and take advantage.When we look at the balance of fiscal year '21, we are looking at what we think will be a gradually improving situation through to the end of the year, and we do think that our capabilities and position in the market is going to position us well to continue to gain share. First and foremost, we think the situation of demand exceeding supply for key brands, Rolex, Patek and Audemars, in particular, will continue throughout this year, in fact, for the indefinite future. Digital, marketing and social media are clearly very, very important in these unusual circumstances. And again, I think we're very advanced on how we use that media. Multichannel, very important, the combination of online and stores overall and increased engagement with our brand partners, particularly new products, where we think is going to serve us well in the balance of the year. And then our technology, our SAP-based system is driving our CRM. We've now adapted them to support remote selling and appointment management. And again, just having that technology gives us the flexibility and ability to respond. So we really think we're well positioned to, if anything, accelerate the market share gain in the remainder of fiscal '21. And with that, I'll pass over to Craig. There you go. Craig?

[Craig Bolton]

Thank you, Brian. So good morning, everyone. It's my objective in the next few minutes to take you through the key initiatives we have running here in the U.K. Just firstly, before we do that, I just want to say the U.K. division is really well poised for further growth. Our structure here is really well established and very effective, both from a retail standpoint and also from a support center standpoint. We've transformed our business in the last 6 years in terms of stores and product and marketing. And as you've already heard, our product -- our luxury watch share continues to grow, as it did last year, up to 37%.I want to cover first just one slide on COVID-19 to kind of box that off. We had a real immediate focus when COVID hit and lockdown happened in mid-March. We really wanted to look after our team members, and the care and well-being of them was really paramount for us initially. We then really enhanced our communication, both to our team members and to our clients, to keep them engaged throughout that period of time. And we instantly turn to adapting our business to what we thought was going to be the post-COVID world of retail. And so we did a great job with that.In parallel to all of that, we wanted to maintain sales and profitability where we could. The 2 key areas for this was our enhanced clienteling, where our teams used the very best CRM tools they've got to drive and presell luxury watches that the consumers then picked up post the lockdown. And then, of course, online sales really motored through that period of lockdown, finishing the quarter at plus 79%.On the next slide, though, we didn't settle down into just the day-to-day running of our online business. We really wanted to focus on new initiatives, too, during that period of time. This slide shows a number of initiatives we had going. One was really to increase the luxury brands that were transactional on our websites. You could see here 6 new brands entered our websites during that period of time, and likes of Panerai and JLC and Vacheron are now transacting across all 3 of our websites. We wanted a new process through our website to allow consumers to preorder and also register interest for new product in advance of that product being launched, so again creating a pipeline of sales prior to that product actually coming out.And then as far as luxury watches are concerned, we really wanted to emphasize watches-of-switzerland.co.uk. And we entered into a significant digital marketing program at the beginning of May, really driving traffic and conversion to the site. And that will form part of a much wider initiative we have for the rest of our fiscal year '21. So as stores started to open, you see on the next slide the effect on traffic, probably no great surprise here. But malls, London and Heathrow traffic was significantly down year-on-year, as you've heard. Really didn't matter as much to our business. Our productivity levels remain very high. Conversion was a multiple of what it was prior to lockdown, and our teams did an unbelievable job with our CRM systems in terms of driving their own traffic.The international business was down 92% as measured from premium tax refunds in quarter 1. We're expecting a similar level, actually a drop for quarter 2 as we go through the summer period. And again, our teams will continue to clientele to cover that loss. What we've proven through this period of time is our domestic and regional businesses are super strong and can more than cover the loss that we're seeing from the international traffic.But what we are aware of, going forward, is we will have to do even better job in driving our own traffic, and we believe the technology we've got here in the Watches of Switzerland Group is going to allow us to do that. The teams have great CRM tools to allow them to drive that one-to-one clienteling on a daily basis in the stores. Our web-enabled facility in the stores allows our team members to really assist our clients to purchase online, and the focus that we've got in digital market versus traditional market just really allows us to reach more of our consumers. And they're a much more engaged and loyal audience as we found, so we're going to invest further in that channel.And then our latest development, By Personal Appointment, was our new appointment system, allowing clients to book in-store, telephone and virtual Zoom appointments. We launched this on the sixth of July, and already it's forming a significant part of our footfall. Over 40% of the traffic coming to our stores now are prebooked appointments by our teams.So as stated previously by Brian, new product really is the lifeblood of our business, and we did think when COVID hit and production was affected for the brands that, that would be less impactful in 2020 but is actually proven, 2020 and into 2021 now, we're very confident new product is going to be excellent. And we're expecting upwards of 400 new products to be launched here in the U.K. with these brands. Rolex is going to be very significant for us. Their new product launches on the second of September. We get to see it on the second of September. And all of these other great luxury brands have either launched or are launching pre-Christmas, exceptional new product and much better than we could ever have hoped for. So we're going to put a big 360 marketing plan behind all of that through all of our digital channels in terms of marketing. We've created a new e-learning platform for our teams to go on and learn all about this new product. And of course, we won't be running in-store events this calendar year, for sure, but we are now getting used to running very effective virtual events, as you can see in the bottom right, when we launched the new Hublot exclusive. Our estate remains really critical for us, and investment in that estate is going to continue into FY '21. Our focus remains on our Rolex stores and the expansion of mono-brands. We really believe in the high street, and we really believe that people still want to come to our luxury showrooms to see this product. And of course, with Rolex, they have to come to our stores to see the product.So just starting with Fraser Hart, first, on the next slide. We only purchased these stores back in February. They actually only traded for 2 weeks prior to lockdown, so we didn't really have much of an indication then of their trading. But since reopening and the support they've had from our group at least, these stores are all trading well ahead of expectations. They've all fully integrated into our group systems, and the people feel very, very good. So we are going to develop and refit all of these stores in the next 2 years. The Kingston store, our Stratford store and Brent Cross store will all be refitted the early part of 2021. And Mappin & Webb, York, where we'll be looking for a relocation, will be done at the early part of 2022.And then we've been super busy the last few weeks, opening new stores as it happens. This great store here on the next slide is the Glasgow Rolex mono-brand boutique we opened on the 27th of July. It's only been trading for 2 weeks but honestly well ahead of any expectations we had for it prior to opening. The store looks absolutely amazing. I would encourage you to go and see it, if you can.Early part of July, we developed our Mappin & Webb, Cambridge store. We actually doubled the footprint on this store, doubled the size of the store, built this beautiful Rolex lounge to the left-hand side of the store and again trading well ahead of expectations.We continued the advancement in our mono-brand estate. We opened 3 TAG Heuer stores within 3 weeks, firstly in Oxford here on the left-hand side and then moved into Kingston and Watford. And we're very, very committed to the development of mono-brands as we move forward this year and beyond.And then we're going to be super busy pre-Christmas still with more openings, more refits. This great store on the next slide is Knightsbridge. We took the store next door to our Watches of Switzerland store. We're building a beautiful Rolex lounge there which will be visible from Brompton Road. We'll be fitting the entire ground floor and first floor with multiple shop-in-shop installs and then a beautiful VIP lounge on the first floor also. Also in November, we've got a new flagship store in Broadgate here in the city. It's a 6,000 square feet showroom on 2 floors. Again, we'll have a Rolex lounge, multiple shop-in-shop installs across the store and also an Omega boutique attached to the right-hand side of the store. And you can see the level of brands we've acquired for the store really is a fantastic array of luxury Swiss brands.Just moving on to the mono-brands that we're doing. This Tudor mono-brand here, which is going to be open in the Westfield center in London here, will be the first Tudor mono-brand in Europe. Tudor also developed a new exclusive product for their mono-brands, so we'll get that product here in the early part of 2021. And this will be the only store in the U.K. where you'll be able to get that product.In April next year, this new development will complete. This new shopping mall in Edinburgh in St. James. We're trying a new concept here with the Breitling and Omega mono-brand in the same space with a shared back of house, a hugely productive space for us and looks absolutely fantastic, I'm sure you'll agree.And then moving through to Trafford Centre where we're going to be opening this TAG Heuer mono-brand store, just post Christmas. We already have a Breitling mono-brand in this center trading very well, and we have the same optimism for this store when it starts trading.So just to summarize, we believe, whilst we've gained market share in the U.K., we'll continue to do so. There's significant investment we've got planned in capital for our existing estate but also in new stores. We'll continue to elevate our store portfolio. Our focus on new product and exclusive product will continue to strengthen our brand partnerships, drive our sales, obviously, and we'll continue to gain shares from that. Our continued investment on online and marketing will continue to allow us to adapt to the change in face of retail and obviously reach more of our consumers in the right locations. And the CRM tools that our teams have got are really high level and really technically forward-thinking and will allow us to drive our own traffic, going forward, and rely less upon what's happening in the high street. So all of our initiatives here, I've just talked through, are all running. We're very confident with them all, and we feel very confident about fiscal year '21.I'm going to pass over now to David.

[David Hurley, Executive Vice President USA]

Thank you very much, Craig. So we're delighted with the progress that we made in the U.S. against our strategic priorities, our results for FY '20 and the strength of our business since reopening. I'm going to bring you through some of the key highlights since we've entered the U.S. market, what we've accomplished over the last year and a little bit of what's upcoming.So just a quick refresher that actually we've only been retailing in the U.S. for less than 3 years, starting when we acquired Mayors in October 17, which gave us the concentration of retail in Georgia but also in Florida, which is one of the largest luxury markets, and also gave us an experienced, scalable support team, which is based on what is now our U.S. headquarters in Fort Lauderdale. We then took over the exclusive luxury watch retailing in the Wynn Resort in December of 2017; and then followed that up with our first Watches of Switzerland, New York flagship, opening up in SoHo in November of 2018, anchored by Rolex and Patek, still, I think, probably the most spectacular store that we've opened up in our network and continues to go from strength to strength in sales versus prior year and since we reopened again in -- on June 22; and last but not least, our Hudson Yards flagship, which opened up in March of '19.So the success of our New York business and the rest of the U.S. group has been driven by innovative marketing and customer experiences, and all of that PR has helped drive both our overall brand awareness but also expanded our consumer database.We've been beyond delighted with the store renovations that we've done with Mayors, and there's no better example of that than our store in Lenox, in Atlanta. So we moved from within the mall to what we consider to be the best location, adjacent to Louis Vuitton and Cartier. We also opened up there our first Audemars Piguet boutique. Lenox is a powerhouse store for us, and traffic has been up over 100% since we've moved from our prior location.On the next slide, you can see our fantastic store in Merrick, in Miami. Again, you can see the new store fascia, which was part of our design, as well as the new Mayors logo. And you can see the welcoming atmosphere from the other images within the store itself. Traffic here is up over 50%, and dwell time has increased for our consumers also.Last but not least, we also opened up in Avalon, in Atlanta. We relocated from another mall that's just over 6 miles away. And again, both traffic and sales have increased as a consequence.So we continued to clientele while closed. The image on the left is one of our store team doing a hand delivery to one of our clients in Florida. We began reopening our stores again on May 7, starting at Atlanta. And our teams were prepared with new operational procedures, and the response from our consumers has been fantastic. Okay. So we continued with our innovative marketing, launching our Grand Seiko exclusive on May 14 to over 80 international journalists. We also utilized AR functionality, so our consumers would be able to wear the watch virtually on their wrists at home, and the response from both press and PR has been phenomenal.So in terms of future growth, we're going to look to replicate the success that the U.K. has with mono-brand boutiques, and we're going to be opening up the first of a series of mono-brands in November of this year. We're going to continue to refurbish our Mayors stores, building on the success of the refurbishments already done.Our next one up is Aventura, which is probably our most successful store in Miami currently. We're adding an extra 2,000 square feet to the store, and we're also going to be opening up our first Bulgari mono-brand. And we'll be following that up in fiscal year '22 with a new location, the American Dream project in New Jersey in the Meadowlands.So we believe the U.S. market is well positioned for long-term growth. It's still very fragmented. We don't enjoy -- nobody enjoys the market share that we have in the U.K., and we're going to continue on the strategy that we've pursued to date to drive future growth. So we're going to continue on our refurbishment program for the Mayors stores that's already been very successful. We're going to continue to open up new projects, such as expanding mono-brands across the U.S., the American Dream project that we're opening up in the next fiscal year. We're going to continue to identify new whitespace locations like we did with SoHo that we've turned into success. We're obviously going to drive e-commerce over the course of the next couple of years. And we're going to, again, take a look at other potential acquisitions where we feel that it makes sense.So with that, I'm going to pass you over to Anders.

[Lars Anders Ragnar Romberg, CFO & Director]

Thank you, David. So we're very pleased to announce that we had yet another record year in the group. Our sales came in at plus 4.8% on prior year. Up until the lockdown, we were blowing it out of the park, growing by 15.8%. And obviously, the last 6 weeks of the year, we had a bit slower growth. In terms of the growth, it came predominantly out of luxury watches, which was very positive throughout the year. We saw our average selling price in the U.K. grow by 11%, in the U.S. by 9%. Very pleased with the refurbishment program in Mayors, where we're trading well ahead of where we had expected. Our net margin throughout the year expanded by 0.1% in spite of having a higher penetration of luxury watches. That's been offset by less customer incentives throughout the year. Our showroom costs, again, on a 46 weeks trading period, still leveraged on prior year. That leverage would probably have been a bit better if we would have traded throughout the year, but we gained another 0.3% out of this throughout the year.Our overheads was up throughout the year. We spent another GBP 2.5 million on marketing, predominantly supporting our U.S. business, as well as our e-com business. In addition to which, we added some structures in to support our business as a public entity.Our opening and closing cost was down year-on-year. Last year, as you recall, we opened up our 2 big flagships in New York. So the opening and closing costs last year was somewhat inflated versus what we've experienced over the past few years. Our adjusted EBITDA margin came in at 9.6%, which is 0.7% ahead of last year. Very, very pleased with that, I must say. And our adjusted profit before tax came in at GBP 49.4 million or plus 86.5% on last year. So all in all, a very good year, we think. In terms of our balance sheet, the goodwill increase relates to the acquisition of Fraser Hart, as you've heard about. In terms of other movements that I want to point to is our inventory went up about GBP 42 million on the year, and that -- related to good intake of high-demand products in February and March, leading into the lockdown. So not a big problem, inventory as such. Our stock turn in the year was 1.9 in total versus 2 in prior year, and that is in spite of losing 6 weeks of sales, so obviously somewhat inflated this year as a consequence of that.Our trade payables is mainly a reflection of our intake of inventory. And in terms of receivable, obviously, we focused a lot on cash management as we went into the lockdown and throughout the lockdown. So we had scaled back on our in-house program throughout the year in the U.S. So that is actually now fully terminated. We're not offering in-house credits since July this year. And also, we didn't prepay our rents as previously done in '19. So obviously, we had a cash benefit as such.In terms of financing, we did replace our bond as part of the IPO, and that was replaced by a much more favorable term loan, an RCF and an ABL. In addition to that, we've layered on post year-end an additional facility of GBP 45 million. And the reason for that is simply because we wanted to have enough headroom in case the lockdown was going to be extended throughout a next very long period of time, so it was more a defensive mechanism. And we haven't utilized it.In terms of our cash flow in the year, our operating cash flow came in at 65.7%, and that is slightly down year-on-year. And the main driver of that is obviously the increase that we've seen in inventory throughout the year.In terms of CapEx, we spent GBP 28.7 million, slightly below what we guided towards before. Obviously, we didn't have any CapEx expenditure during the lockdown because everything was in standstill. The remainder of our finance structure is the result of our refinancing.Now to the guidance. We are looking at this fiscal year with some degree of confidence, I must say. It's going to be on a 53-week basis. The first quarter trading has been very encouraging, and we obviously haven't been open throughout the whole quarter. But still, we've traded ahead of where our initial expectations were.In terms of assumptions that we're building our plan on is obviously that there's going to be a continued strong demand in the domestic market, both for luxury watches, both in the U.K. as well as in the U.S. We do not expect any further national lockdowns nor in the U.K. or in the U.S. throughout this year. We don't expect any significant reduction in production during the year and obviously no major disruption from Brexit. Most of our products are sourced out of Switzerland, so no major impact expected on that. However, we do expect to see further localized disruption, as we've seen in the first quarter with Leicester and Atlanta and Georgia being impacted as examples. We think that demand is going to continue to exceed the supply in our domestic markets of the most sought-after brands. In terms of traffic flow, we do expect our airport business and tourism to moderately improve throughout the year, but it's going to be slow and gradual. We also had the benefit of the acquisition of Fraser Hart that we've completed at the back end of last fiscal year, as well as some additional projects, as you've heard earlier in this presentation.That will take our guidance to sales of about GBP 840 million to GBP 860 million or plus 4% to 6% on this year. We do expect our EBITDA margin to remain flat year-on-year. Our depreciation and amortization is expected to come in between GBP 21 million and GBP 23 million. Our finance costs is projected to be GBP 5.3 million to GBP 5.8 million. Just as a side note, GBP 1.7 million of finance costs this year was incurred in relation to the old bond. Our tax rate is expected to come in between 21% and 22.5% as we shift more profit into our U.S. business that is growing. Obviously, the tax rate there is a bit higher. Capital expenditure is planned to come in between GBP 28 million and GBP 32 million throughout the year, and our closing debt is projected to come in between GBP 90 million and GBP 110 million. I will now hand over to Brian for some closing remarks.

[Hugh Brian Duffy, CEO & Director]

Thanks, Anders. David and Craig, thanks for your presentations. Just a couple of final concluding remarks. I mean, clearly, our strategy is working. We see no reason to change it at all, and we're going to carry on investing. And maybe counter to what's happening elsewhere in the market, we are going to be opening stores. You've heard the formats that we'll be doing for stores. We really believe in our format or multichannel approach overall. We think the market is going to gradually improve throughout the year. But even at the end of the year, we'll not be back to 2019 levels. We think that's probably calendar '22 at the earliest before we would see all that coming through. But we're just very well positioned in this market with our technology, with our positioning, with our market share, and we think we'll gain share during the balance of fiscal '21.And then finally, just to say that if there ever was a time for a team spirit and focus and commitment to be shown, then our team really stepped up during lockdown and since, and they take a lot of credit for the great numbers that we are delivering today.So thanks for your attention. And with that, we'll move over to the Q&A.

[Operator]

[Operator Instructions] We have our first question from Louis Singlehurst from Goldman Sachs.

[Louise Susan Singlehurst, Managing Director]

Thank you very much for all the detail that you've provided there, particularly the run rate during Q1, very helpful. I wonder if you can just help us think about the U.S. growth and the outlook. Obviously, incredibly strong as you saw that number at the back end of the quarter. I suppose you're just trying to contextualize how much you think is the pent-up demand, but also if you think it's obviously a sign of the branding initiatives being probably ahead of the original plan. And also for the U.S. market, if you can help us think about potential -- I know we will talk about how fragmented the market is, the potential for share probably coming a little bit sooner, given the result of the impact of COVID-19. And then just secondly, I wondered, and particularly, Brian, if you can just help us think about the negotiations with brands for the product. Obviously, the team just highlighted that you've got the new launches coming in from Rolex, I think, September 2. Presumably, you have pretty good view of the allocation you're going to get, given the guidance that you've given for the full year. But can you just help us think about the product that you're getting, not just from Rolex, but from the other brands as well? That would be really helpful.

[Hugh Brian Duffy, CEO & Director]

Okay. Louise, thanks for your question. Clearly, as we've reported, we have great momentum in the U.S. market and are very, very pleased about it. Week 46, as you know, we were running at plus 35% for the year overall, and that was ahead of where we expected to be. Our refurbs, in particular, that we had done in Mayors exceeded our expectation overall. So we're feeling very, very positive about the U.S. market. Clearly, Q1, the U.S. has, again, been outperforming overall, and that's great to see. So there's no question that the demand is there. There's no question that our approach to the market and the investments that we're making is stimulating further demand, and everything is good. The big question is our ability to get supply to respond to that demand overall, as here in the U.K. So our situation, just to move on to supply overall situation remains as we've been reporting it. Clearly, we're pushing and use every opportunity we can to justify increased supply into our market. The biggest single thing that we do that does get us additional supply is investment and expansion overall, so the projects that we have in place are all on the basis of getting additional support to make them effectively work. So these conditions haven't changed. But our view of the global market is that there's probably been a bigger decline in sell through because of the absence of tourism from the global market than there has been on production overall. Production, there was lockdown in Switzerland with production affected anywhere between 13% and 25%. So at a global level, we think that should translate to have been a wee bit more product around. Are we seeing that -- do have any confirmation of that at this stage? Not really, but we have as much visibility as we've ever had. Obviously, we have a -- in the very short term, the next 6 or 8 weeks, we know where we are. And I think, overall, we're in pretty good shape on supply. But supply is the biggest constricting factor for growth. And our demand, overall, is greater than we might have predicted it a year ago, particularly because of the kind of dynamic success that we're having in the U.S. You had asked about the other brands, too. Situation, again, remains the same, what I just said, applies to kind of Rolex, Patek and Audemars.

[Louise Susan Singlehurst, Managing Director]

And can I just ask in terms of the -- like the percentage that would consider to be on a wait list in terms of product or how big the Rolex business is now?

[Hugh Brian Duffy, CEO & Director]

Yes. But I mean, overall, I think we've heard some kind of comments or questions about how we used the waiting list during this timing, effectively reduced it, but honestly, not really. We've never taken names. We don't want to take names of people that might have to wait 2 or 3 years. We want to manage expectations overall. So our wait list remains as kind of buoyant and healthy as it's ever been, U.K. and U.S. Fair to say that these brands -- I mean, in total, luxury watches have become a bigger part of our business, as the numbers -- you have the numbers there to see that. So that trend continues overall. And our top 7 brands: Rolex, Patek, Audemars, Cartier, Omega, Breitling, TAG,, those top 7 brands are an even bigger share of our business overall. And within that, yes, Rolex continues to outperform overall as part of our mix.

[Operator]

Our next question is from Greg Lawless from Shore Capital.

[Greg Lawless, Research Associate]

Well done on the numbers. Just a couple for me, if I could. Could you just talk about the pricing outlook in terms of inflation? And could you just remind us with the last kind of consumer recession, kind of how resilient the business was during kind of a consumer downturn?

[Hugh Brian Duffy, CEO & Director]

We are not anticipating or we haven't built into our thinking a planning any price increases. There are price increases affecting this year. There was an increase in Rolex that went through in January, in the U.K., just over 7%; in the U.S., 3%. There was an increase in Omega that's come through as well. So they will impact this year, and they are considered in the guidance that we've given. But beyond that, we haven't considered that there could be further price increases. The -- last 2008, U.K. market was reasonably resilient in the sense that it didn't go down. It has been growing well going into the financial crisis but was effectively flat during that period. It was before our time with the group, but this group here continue to perform reasonably well during that time and kind of maintained profitability and so on. The conditions today are much more kind of dynamic and buoyant than they were back then. The disparity between supply and demand is much greater today than it was then. So back then, the market went down because demand went down because people weren't traveling and local financial crisis as well. I think if it happened, as our numbers are testament to what happens today, there's more than enough -- others that are waiting to effectively fill the gap as we are doing in this quarter. We're way down on international business, as you've seen. And yes, with complete compensation for it by domestic consumers getting the opportunity to buy overall. So I think we're looking at different conditions, and the supply situation remains a critical factor.

[Operator]

Our next question is from Russel Higgins from Barings.What was the estate growth, including M&A. Could you please give us a better sense of L-for-L sales growth in quarter 1 and FY L-for-L guidance?

[Lars Anders Ragnar Romberg, CFO & Director]

We've actually not guided or, for that matter, disclosed our like-for-like. Obviously, the estate was closed for 6 weeks. So -- and on and off, stores were open. So it's really hard actually to gauge what the like-for-like is for this last quarter, as well, obviously, for the fiscal year of last year, where we had the same disruption at the back end. So we haven't disclosed that. In terms of estate, obviously, we acquired the 4 Fraser Hart stores at the back end of last year, as you're well aware of. We also said on our RNS what we think those will contribute in our business over the next 12 months. So that is also out there, so those numbers are publicly available. Other areas of estate growth is predominantly within the mono-brand sector where we'll open a few mono-brands, which we're very pleased with. In addition to that, the big win of the year, I think, from a capital expenditure point of view has been in the Mayors estate, where we obviously completed 4 refurbishments and relocations, which all have worked out actually ahead of what I was expecting. So we're very, very pleased with that. So for the coming year, if you look at it, out in '21, the major projects that we're doing in this year, obviously, a, we're continuing our expansion within the Mayors. So we're doing Aventura, as we speak, and that's going to be a huge expansion of Rolex within that location. So that's going to be a good addition to what we do. We're looking at Boca Raton at the back end of the year. We're also expanding in Knightsbridge, where we've taken the adjacent units where we're expanding again with Rolex into a fantastic space. So they get their own room with their own frontage. So that will be good. And then we obviously have Broadgate that is coming on stream in November of this year. So those are the major projects that we're looking at.

[Hugh Brian Duffy, CEO & Director]

Added Rolex, particularly in Glasgow that we just completed. Everybody seems to forget about Glasgow. I don't know why that would be. But we've done a beautiful store that we opened in 27th of July as a Rolex boutique in Glasgow. The first one in Scotland, and it looks amazing, and it's performing very well.

[Operator]

Our next question is from Richard Taylor from Barclays. Please can you comment on what you expect to happen in the rest of the market in the U.K. and U.S.? Are you seeing capacity full yet from other less well-financed operators? And how would you expect this to change as the year progresses?

[Hugh Brian Duffy, CEO & Director]

A good question, Richard. And we've hopefully pointed out in our presentation that we think our sort of position and resources really advantages us during these market conditions. And by definition, those that don't have this sort of technology or capability you would say would be disadvantaged in the situation. Digital has clearly become very, very important; activity in social media, very, very important. If you see the awareness that we created in New York through some fabulous, bold PR events and activity but very much amplified through digital and social mechanisms. That's how you have to operate today. I think multichannel is hugely important today, so going wherever the client wants to be shopping is critical. So whether that's a mono-brand or an airport or online, whatever it may be, we are responding to those trends that are there. So we are investing. We're ambitious. We have scale. We have technology. We have in-house skills and social media and all that. And by definition, other players out there, you could run through and see whether or not they tick all of those boxes that are there. And so I do think we are competitively advantaged, and that advantage has definitely been accelerated by all of these circumstances. So I think it's a fair thing to say competitively what might happen with the rest of distribution out there. I mean, fair to say that anyone who has a good brand portfolio, Rolex, in particular, will be doing well, too, along with us. And we haven't specifically heard of any financial problems in the network. It's a COVID network, as we know, selective distribution, not large scale. So we'll see. But we are certainly focusing on what our competitive advantages in these circumstances.

[Operator]

We currently have no further questions. [Operator Instructions] We have no further questions.

[Hugh Brian Duffy, CEO & Director]

Okay. Well, thanks, Mella. Thanks for helping us through the call. Thanks, everybody, for joining us. It's obviously an unusual time that we're all dealing in, including how we made this presentation. I hope it's been informative and helpful. And thanks to my colleagues who are here who did most of the work in delivering the numbers and the presentation. And we look forward to hearing from you all again soon. Thanks for joining us.