ii view: Watches of Switzerland maintains growth forecasts

First-quarter trading update for 17 weeks to 30 August

• Continues to expect currency adjusted annual revenue growth of between 5% and 10%
• Continues to expect a 40-80 basis point expansion in adjusted profit (EBIT) margin

ii round-up:

Retailer Watches of Switzerland Group (LSE:WOSG) maintained hopes for growth in full-year revenue and profit, underpinned by strong trading in the US and improving signs in the UK.

The Leicestershire headquartered company continues to expect currency adjusted growth in revenues for the ongoing financial year of 5% to 10%, aiding a 40 to 80 basis point improvement in adjusted profit margin.

Shares in the FTSE 250 company fell 2% in post results trading having come into this latest news up by around 40% so far in 2026. The FTSE 250 is up by close to a tenth year-to-date, while fellow luxury retailer Burberry Group (LSE:BRBY) has fallen by a similar amount.

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Watches of Switzerland operates prestigious brands including Mappin & Webb and Goldsmiths in the UK and Mayors and Betteridge in the US.

During the period Goldsmiths branches in Chelmsford and Watford both reopened following refurbishment, with a new store in Glasgow being worked on.

In the US, a new Watches of Switzerland multi-brand showroom opened in Avalon, Georgia, with further stores in Greenwich, Connecticut and Marlton, New Jersey in the pipeline.

Group capital expenditure for the year to late May 2027 is expected to remain between £60 million and £70 million.

The group’s previous acquisition of four Deutsch & Deutsch retail stores in the US continues to integrate well, with a positive impact on performance expected.

A first-half trading update is scheduled for 10 November and interim results on 10 December.

ii view:

Watches of Switzerland Group is a retailer of both luxury watches and jewellery across the UK and US. As of early September, it operated 186 showrooms across the UK and US including 75 dedicated mono-brand boutiques in partnership with makers including Rolex, OMEGA and TAG Heuer.

Luxury watches accounted for 82% of sales in its last financial year to late May 2026, with luxury jewellery a further 13%, and servicing, repairs, and insurance the balance of 5%. The US made most sales at 51% with the UK the balance of 49%.

For investors, potential tax rises in the UK could hinder demand going forward. US trade tariffs on Switzerland continue to be navigated with group costs previously rising and margins pressured. A previous move by Rolex to buy a rival watch retailer had investors worried about the watch retailer’s relationship with this key supplier, while Watches of Switzerland, unlike other high-end rival retailers Moncler and Dr Martens, does not currently pay a dividend.

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More favourably, actions to assist performance were previously taken including a readjustment of the group’s store portfolio. Full year revenue hit a record this year, with management continuing to flag growth opportunities in the USA. Chief executive Brian Duffy previously expressed his confidence that the company's relationship with Rolex would not change despite its purchase of a rival retailer, while luxury watches are arguably now seen as an investment as well as a status symbols and instruments to tell the time.

On balance, and while exposure to consumer spending generates some caution, a consensus analyst fair value estimate above £8 per share implies further optimism in City circles.

Positives:

• Previous bolt-on acquisitions
• Offering exposure to hard assets in an inflationary world

Negatives:

• Uncertain economic outlook
• No dividend payment

The average rating of stock market analysts:

Buy