On 18 January, Watches of Switzerland Group (LSE: WOSG) shares took a giant kicking.

The posh watch vendor was hit by a 37% worth fall on the day, after hitting the market with a shock revenue warning.

Does that imply a shopping for alternative for buyers proper now? Let’s look a bit nearer.

Poor Christmas

The corporate noticed weak buying and selling over the vacation spell, and has now lowered its full-year expectations.

CEO Brian Duffy mentioned: “The festive interval was significantly unstable this yr for the luxurious sector, with customers allocating spend to different classes corresponding to style, magnificence, hospitality and journey.“

Different shares within the sector have suffered too, as Burberry shares additionally hit the skids. The style model has reported an analogous slowdown in international luxurious retail.

Burberry shares have misplaced 45% in 12 months, they usually’re down 30% prior to now 5 years.

Again at Watches of Switzerland, the board has simply reduce its full-year income steering to £1.53-£1.55bn, from a earlier £1.65-£1.70bn.

Share worth experience

The shares suffered final yr as properly, when Rolex purchased out Bucherer and its chain of shops. Rolex instructed us it wasn’t transferring into retail, however it was nonetheless sufficient to present Watches of Switzerland shareholders a scare.

Even after that, and this newest crunch, the share worth continues to be up 20% prior to now 5 years. However it’s method down from its peaks of simply two years in the past.

To me, the shares appear like they may be good worth in the present day. And even higher now, after this fall.

Previous to the most recent unhealthy information and worth drop, forecasts had the inventory on a price-to-earnings (P/E) ratio of 12. And with anticipated earnings development within the subsequent few years, they’d that dropping to below 9 by 2026.

Good worth now?

Earnings forecasts should be reworked now. However will a brand new decrease determine actually justify the 37% crash we simply noticed? Or has the market overreacted, because it typically does? I can’t assist pondering it may be the latter.

It’s arduous to guage the luxurious retail market, although, and a few of us may be shocked if it’s been hit by inflation — these well-heeled people don’t really feel it, do they?

Effectively, possibly the mega-rich may be resistant to rising prices. However all kinds of individuals at many revenue ranges like, and purchase, good watches.

And there must be a section of each retail market the place consumers have to sluggish their spending when instances are that bit tougher, absolutely.

Retail is retail?

There’s a few causes I gained’t purchase Watches of Switzerland shares now. However it’s primarily as a result of I don’t actually perceive its area of interest market and the way it works.

And there are far more low cost shares on the market, which I perceive lots higher, than I can presumably purchase.

However for many who know this market, and who would need maintain for the long run, this must be a purchase value contemplating at this worth.