Rolex retailer Watches of Switzerland has reported that its UK sales continue to be affected by a "minimal return" from tourist spending due to the absence of VAT-free shopping.
Despite this, the group, which also owns the Goldsmiths and Mayors jewellery chains, expressed cautious optimism about trading over the next year as it posted a 4% increase in group revenue to £380million over the 13 weeks to the end of April. The group revealed that revenue in the US grew by 14%, but revenue in the UK and Europe fell by 4% amid "challenging macroeconomic conditions".
The group further noted that UK performance "continues to be driven by domestic clientele" with "minimal return of tourist spending due to the lack of VAT free shopping". The Government abolished VAT-free shopping for tourists a few years ago, a move which particularly impacted luxury retailers who depend on wealthy tourists.
This so-called tourist tax has been criticised by luxury retailers in the past, as they rely heavily on affluent tourists. Other luxury retailers including Burberry and Mulberry have attributed weaker sales in the UK to the reversal of tax-free spending, with shoppers instead opting to spend more on luxury items in other European cities.
Despite the drop in European revenue, chief executive Brian Duffy said the firm "finished the year strongly". "Particularly pleasing was the performance in the US, with sales up 14% in the period. We are confident that our strategy, exceptional client service and strong brand relationships enables us to continue to drive growth and gain market share."
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