Watches of Switzerland: Rolex retailer bolstered by US sales
Watches of Switzerland has expressed optimism about the European luxury market and noted momentum in the US, in the latest signs the global luxury market is beginning to recover from a two-year downturn.
The watch retailer said the luxury market, which has been under pressure from lower disposable income and changing trends, has stabilised.
The cost-of-living crisis has seen Europeans, particularly Gen Z, flock to second-hand luxury goods rather than the primary market. Compounded with a slowdown in China, this has led to a significant pullback in the luxury market.
But Watches of Switzerland, the UK’s largest luxury watch operator, said demand for key luxury brands was “strong” in the third quarter of the year, and the US market had “seen further momentum”.
The US market was its core driver in the second quarter, with revenue up 24 per cent to £355m.
Trump’s tax cuts to the wealthy are widely expected to boost luxury brands with exposure to America.
Watches of Switzerland’s update will likely be another boon to luxury investors, who have been buoyed by positive results from Richemont and Burberry in the last month.
Together, these results suggest that the slowdown in luxury goods has begun to subside, and an upswing is coming.
Watches of Switzerland set to ‘Outperform’
RBC analysts said the results were “reassuring” and rated the stock ‘Outperform’, but noted the watch industry remained in a cyclical downturn for now.
Just before Christmas, analysts had predicted a rebound across the luxury sector, predicting five to six per cent revenue growth in 2025.
“Whilst luxury has generally been a tough sector [in the second half of 2023 and in 2024]… the setup is improving,” RBC analysts Piral Dadhania and Richard Chamberlain said.
However, the trend of pre-owned goods is unlikely to go away. In its report, Watches of Switzerland noted the “encouraging performance” of its pre-owned businesses.
The retailer also bought a New York-based media company, which has an editorial focus on wristwatches, last October in a bid to gain online growth.
Watches of Switzerland confirmed its full year guidance.