NextFin News - Watches of Switzerland Group Plc shares surged to a record high on Thursday after the luxury retailer upgraded its annual growth forecasts, citing an insatiable appetite for high-end timepieces among American collectors. The London-listed company now expects constant-currency revenue to grow between 9% and 11% for the 2026 fiscal year, a notable step up from its previous guidance of 6% to 10%. The revision follows a period of aggressive expansion in the United States, which has rapidly evolved from a secondary market into the primary engine of the group’s profitability.
The U.S. market now accounts for 59% of the group’s adjusted EBIT, a figure that underscores a fundamental shift in the company’s geographic weight. Revenue in the U.S. jumped 20% at constant currency to £409 million in the first half of the fiscal year, bolstered by the acquisition of Texas-based Deutsch & Deutsch and the continued rollout of Rolex-anchored showrooms. While the United Kingdom remains a "decent" performer, according to management, it is the American "super-consumer" who is insulating the retailer from broader macroeconomic headwinds that have battered other segments of the luxury industry.
Eleonora Dani, an equity analyst at Shore Capital, noted that the group’s performance reflects a "resilient demand profile" that appears decoupled from the inflationary pressures affecting middle-income households. Dani, who has maintained a generally constructive view on the luxury retail sector, argues that the scarcity of key brands like Rolex, Patek Philippe, and Audemars Piguet creates a structural floor for revenue. However, her perspective is not yet a universal consensus; some analysts remain cautious about the sustainability of this growth if the U.S. labor market cools or if the "waitlist culture" that has driven hype begins to fatigue.
The company’s success is also a byproduct of favorable trade shifts. U.S. tariffs on Swiss watch imports were recently settled at 15% on landed cost, a significant reduction from the 39% levels that had previously threatened margins. This regulatory relief, combined with a 17% increase in e-commerce revenue, has allowed Watches of Switzerland to improve its return on capital employed to 17.3%. The group also completed a £25 million share buyback program, signaling confidence in its cash flow, which rose 71% year-on-year to £48 million.
Despite the record-breaking share price, which touched 559.50 pence earlier this week, risks remain on the horizon. The group’s adjusted EBIT margin saw a slight compression of 30 basis points to 8.1%, reflecting changes in product mix and the lower margins associated with certain wholesale activities, such as the Roberto Coin integration. Furthermore, the heavy reliance on a handful of "anchor" brands means any shift in distribution strategy from Swiss manufacturers—who have increasingly toyed with direct-to-consumer models—could pose a long-term threat to the third-party retail model.
For now, the momentum is firmly with the retailers. The acquisition of Timeless Luxury Watches in Plano and the expansion in Texas suggest that Watches of Switzerland is betting on regional American wealth to offset any potential stagnation in European markets. As long as the supply of the world’s most coveted watches remains strictly controlled by Geneva, the gatekeepers of those allocations in the U.S. are likely to remain in a position of strength.
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