Watches of Switzerland Group Q3 Earnings Call Highlights

Watches of Switzerland Group (LON:WOSG) reported a strong third-quarter FY26 trading performance, with Chief Executive Officer Brian Duffy telling investors that momentum seen in the first half continued through the key Christmas holiday period. Duffy was joined on the call by Chief Financial Officer Anders and Group Finance and Investor Relations Director Caroline.

Management said demand for its “key brands” remains strong and continues to outstrip supply in both the U.S. and U.K. markets. The company also raised its full-year revenue growth outlook on the back of the quarter’s performance, early benefits from recent investments, and the contribution from its newly announced acquisition of Deutsch & Deutsch.

Third-quarter trading and market commentary

Duffy said the U.S. delivered “sustained broad-based growth across categories, brand, and price points,” which he attributed to the strength of the group’s model and what he described as continued buoyancy in the luxury watch market. He highlighted pre-owned, e-commerce, and Roberto Coin as growth projects “performing particularly well.”

In the U.K., Duffy said trading was consistent with first-half trends and called out the performance of the Rolex Old Bond Street boutique. He said the flagship showroom has generated strong client engagement and has been attracting a high level of new customers, with insights being shared across the wider store estate to help elevate the luxury retail experience.

On the consumer environment, management described the U.K. as “stable,” noting that sentiment appeared “a wee bit better” than at the prior update. Duffy said the company placed slightly more emphasis on value during the Christmas season and reported a good holiday period in the U.K.

In the U.S., Duffy described the consumer as “very buoyant and positive and confident,” adding that spending has remained strong. He referenced Bank of America credit card data for January that he said showed strength in luxury jewelry and watches. He also said there was “no change in the momentum going through January,” calling it a good month for the business.

Guidance raised as profitability outlook updated

Management said it now expects full-year revenue growth of 9% to 11% at constant currency, up from the previous 6% to 10% range. Duffy said the improved outlook reflects strong quarterly trading, early benefits from e-commerce and marketing investments, good visibility for the balance of the year, and the contribution from Deutsch & Deutsch.

On profitability, the company said its EBIT margin percentage is expected to improve in the second half, but for the full year the margin is now expected to be down 70 to 90 basis points versus the prior year. Management attributed the margin outlook to several moving parts, including brand margin adjustments that are “partially offset by price increases,” investment costs, and some one-off items.

Anders said the second-half margin profile should improve versus the first half, but noted headwinds impacting the full-year view. These included a prudent provision related to a Roberto Coin department store debtor balance following a recent Chapter 11 filing in the U.S., as well as higher variable compensation tied to sales performance. Management declined to quantify the specific provision amount when asked.

Other factors discussed on the call included product mix impacts from a stronger contribution from pre-owned, which management said carries a lower product margin from an EBIT margin perspective even though it is cash accretive. Duffy also said brands have faced “pretty unprecedented levels of cost inflation,” citing gold prices, currency moves (including the Swiss franc and U.S. dollar), and tariffs, which has led to retailer margin adjustments that he expects to “wash through next year.”

Inventory, allocations, and supply dynamics

Asked about product allocation, Duffy said the allocation process with key brands was ongoing but described it as a normal process with “nothing really changed.” He added that the company had sufficient certainty to reflect expected allocations in its projections for the remainder of the year.

On inventory levels, management said stock is in “good shape” in both the U.K. and the U.S. However, Anders noted the U.S. may be “a bit light on certain brands” because some suppliers held back shipments while waiting for tariffs to normalize, creating a short-term supply issue in that market.

Customer trends: younger buyers, digital influence, and collectors

In response to a question about customer profile, Duffy said the company has been encouraged by a younger demographic in the U.S. market and pointed to strong interest in luxury watches among younger consumers, including at higher price points. He added that the Hodinkee media business provides additional insight into watch enthusiasts and has a younger appeal.

Duffy also cited the influence of digital media and social platforms, saying the category communicates well through digital channels via heritage, craftsmanship, and ambassador-led storytelling. He added that the company is seeing more women buying into the category and “much more self-purchase.”

He also noted a difference in customer mix between markets, saying collectors represent about 25% of the company’s business in the U.K., versus closer to half in the U.S.

Acquisition and project pipeline

Duffy said the group was “delighted” to announce the acquisition of Deutsch & Deutsch, which adds four Rolex-anchored showrooms in Texas and increases the company’s presence in the state. When asked about potential revenue uplift from refurbishment and integration, management said it was too early to quantify. Duffy said the immediate focus is on supporting the existing team and that the company’s acquisition structure—keeping the owner in place with an ongoing role and an equity interest—works well for family businesses in the sector.

He added that two of the four stores have already been refurbished and that the group believes it can bring capabilities such as online and pre-owned to the acquired network, along with other brand development opportunities.

On the broader project pipeline, Duffy said there were no delays and that the company has its “usual full program of activities” in both the U.K. and U.S. He referenced multiple initiatives, including progress on moving e-commerce to a Shopify platform—saying Watches of Switzerland is already on the platform and Mayors is expected to follow in the coming weeks. In the U.K., he cited the Glasgow boutique as a major project scheduled to open in early summer and said work is advancing with Rolex on a Heathrow project, although an exact date has not been finalized.

Closing the call, Duffy thanked the company’s teams for navigating what he described as a volatile year and said management is looking forward to more stable conditions as it plans for fiscal 2027.

About Watches of Switzerland Group (LON:WOSG)

Established in 2007 the Watches of Switzerland Group is the UK’s largest luxury watch retailer, operating in the UK and US comprising eight prestigious brands; Watches of Switzerland (UK and US), Mappin & Webb (UK), Goldsmiths (UK), Mayors (US), Betteridge (US), Deutsch & Deutsch (US), Analog:Shift (US) and Hodinkee (US), with a complementary jewellery offering. Since 8 May 2024, the Group has also owned the exclusive distribution rights for Roberto Coin in the USA, Canada, Central America and the Caribbean.