The Watches of Switzerland (LSE:WOSG) share price jumped 132% in 2021. The FTSE 250 incumbent’s rise surprised me, but what’s in store in 2022? Should I add the shares to my holdings? Let’s take a look.
Luxury watch purveyor
Watches of Switzerland is the UK’s largest luxury watch retailer. If you hadn’t already guessed, it specialises in Swiss timepieces. These are often seen as the best and priciest in wrist wear. The company has 16 branches throughout the UK.
As I write, WOSG shares are trading for 1,264p. A this time last year, the shares were trading for 650p, which is a 94% return over a 12-month period.
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2021 success and looking ahead
The WOSG share price increased nicely due to positive growth and better than expected performance. A H1 report released in December proved this. The FTSE 250 incumbent reported that revenue increased over 40% compared to the same period last year and net operating profit increased by over 50%. Crucially, a debt position of £22m last year turned into a net cash balance of £30m this year.
So what’s next? Watches of Switzerland announced a growth plan last summer for the next five years. This could boost the shares to never before seen levels and provide generous returns to investors. Part of this plan includes increasing its position in the UK market. In addition to this, it wants to increase its presence in the key US and EU markets. Both of these markets are bigger than the UK and could be more lucrative. A vital part of this growth initiative is to enhance its e-commerce offering. The rise in the e-commerce shopping experience has been accelerated by the pandemic.
FTSE stocks have risks
Despite a successful 2021, Watches of Switzerland could face roadblocks in its growth plans. Growth is not easy and many issues can occur. Despite bucking economic trends, the post-pandemic global economic recovery is still uncertain and, after all, watches are a luxury item. In addition to this, the rise of new wealthy individuals means there are lots of firms vying for their business so competitors in the market could affect growth in 2022 and beyond. Finally, the shares do look a bit expensive with a price-to-earnings ratio of 41 as I write. There is the risk the growth could already be priced in.
Overall I believe Watches of Switzerland could be a great FTSE stock to add to my holdings. I would buy at current levels and I am excited about its journey ahead. It has a clear plan in mind, a healthy balance sheet to support growth and a track record of consistent growth. I do understand past performance is not a guarantee of any future performance, however. 2022 could be another fruitful year for Watches of Switzerland if 2021 is anything to go by.
Jabran Khan 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.
