Shares in Watches of Switzerland (LON:WOSG) ticked higher after the luxury timepiece retailer narrowed FY27 guidance to the upper end of the range despite an unsettled macroeconomic backdrop. The upgrade followed a strong H1 for the Rolex-to-Breitling brands seller.
The company benefited from enduring demand for watches and jewellery in both the US and UK markets.
Clocking up strong growth
The UK’s largest luxury watch retailer traded slightly ahead of expectations in the half to 1 November, during which group revenue ticked up 15% to £974 million. Adjusted EBIT (earnings before interest and tax) grew the best part of 30% to land in the £87 million-to-£89 million range.
And this robust H1 showing gave management the confidence to narrow its FY27 guidance to the upper end of the previously communicated range. Watches of Switzerland now expects to deliver FY27 constant currency revenue growth of 7% to 10%, an upgrade on earlier guidance for 5% to 10% growth.
The FTSE 250 firm also expects to deliver EBIT margin expansion of 60 to 80 basis points, up from its previous forecast for a 40 to 80 basis point increase.
Double-digit US growth
In the US, H1 sales jumped 22% to £501 million, including a good contribution from the Deutsch & Deutsch acquisition. Encouragingly, growth proved strong across the group’s portfolio of luxury watch brands, complemented by an outperformance in luxury jewellery, led by Roberto Coin.
| H1 sales by category (£m) | H1 FY27 | H1 FY26 | Reported change |
| Luxury watches | 812 | 706 | +15% |
| Luxury jewellery | 123 | 103 | +20% |
| Services/other | 39 | 36 | +9% |
| Group revenue | 974 | 845 | +15% |
Source: Watches of Switzerland, H1 trading update
Sales in the UK increased 9% to £473 million against an ‘improving market backdrop’, with Watches of Switzerland calling out ‘strong momentum in flagship boutiques and across many regional cities’.
Growth could slow in H2
‘As we head towards the important holiday season, trading momentum remains good in both markets, but we continue to plan prudently,’ explained CEO Brian Duffy. ‘Our FY27 guidance reflects the fact that the second half contains one fewer trading week year on year and that the group will annualise the acquisition of Deutsch & Deutsch in January.
‘Taken together, these factors mean that we would expect a lower level of revenue growth in the second half than in the first half, alongside more moderate EBIT margin expansion.’
Despite a challenging backdrop for purveyors of bling, Watches of Switzerland continues to deliver strong growth on both sides of the Atlantic. This reflects the demonstrable resilience of the luxury watch and jewellery categories.
Importantly, this top-line growth is translating into improved profitability and cash generation. And balance sheet risk is reducing, with Watches of Switzerland expecting to close H1 with net debt reduced by £88 million year-on-year.
Sharesify is particularly excited by the long-run opportunity in the US, where Watches of Switzerland has considerable potential for further growth and market share gains.
We would also point out that Watches of Switzerland isn’t just about watches, it’s about the whole customer experience and repeat business. The stores are opulent, and the service level ensures customers return when they are feeling flush. This provides a kind of defensive moat which rivals struggle to compete with.
Forecasts for the business look conservative, in our view. And this means there should be further upgrades to follow in the years ahead.
