- US business drives growth
- UK returned to growth
- Margin guidance spooks market
High-end timepiece retailer Watches of Switzerland (WOSG) clocked-up record sales for the year ended 27 April 2025 thanks to much-improved second-half trading, and the FTSE 250 firm also delivered a positive outlook on full-year 2026 revenue.
Unfortunately, the Rolex-to-Patek Philippe purveyor also guided for a potential margin hit of up to 100 basis points this year due to US tariffs on Swiss imports, which have already led to price increases across the pond, sending the shares down 5.6% to 398p in early dealings.
TARIFF TROUBLES
For the new financial year, the UK’s largest luxury watch retailer guided for sales growth of between 6% and 10%, which would see revenue land in the £1.71 billion to £1.78 billion range.
However, the market was spooked as the company warned it expected adjusted EBIT (earnings before interest and tax) to be between flat and down 100 basis points, guidance which assumes US tariffs on Swiss imports stay at 10%.
‘The outcome of US tariff developments remains uncertain,’ warned Watches of Switzerland.
‘We are in regular dialogue with our brand partners, but it is too early to comment on the potential sector impact of further changes. We will provide a further update as to the potential impact on full-year 2026 guidance once the situation becomes clearer.’
REVENUE TICKING HIGHER
The margin alert overshadowed otherwise solid full-year 2025 figures from Watches of Switzerland, with revenue up 7% to over £1.65 billion. The bulk of the growth arose from a strong performance in the US, which compensated for more subdued showings in the UK and Europe.
The company benefited from continued showroom expansion, the launch of an upgraded website in the US and the ongoing integration of recent acquisitions of Roberto Coin, the Italian luxury jewellery brand, and Hodinkee, a digital platform for luxury watch enthusiasts.
US demand firmed up towards the back-end of the year following a Liberation Day wobble, helping adjusted EBIT to improve 11% to £150 million, although pre-tax profit fell 18% to £76 million after Watches of Switzerland absorbed a rise in finance costs.
WHAT DID THE CEO SAY?
‘Our US business has continued its excellent momentum, surpassing $1 billion revenue for the first time, bolstered by the acquisition of Roberto Coin,’ said chief executive Brian Duffy.
‘The UK has returned to growth as trading conditions have stabilised. Our performance reflects our differentiated business model, with our scale and leadership in our chosen markets, supported by long-standing, collaborative partnerships with world-leading brands across luxury watches and luxury branded jewellery underpinning sustained growth.’
EXPERT VIEWS
Jefferies, which has a ‘Buy’ rating on Watches of Switzerland, said: ‘We presume the major swing behind the margin delta will be the extent to which major brands will continue to require wholesale clients in the US to partly shoulder the impact of the current 10% tariffs on Swiss imports.’
Shore Capital commented: ‘The business has done an admirable job in driving margin recovery alongside revenue growth in full-year 2025, but in our view further margin recovery is needed before the market offers a more generous rating on the stock.’
