Watches of Switzerland lifts FY sales outlook but shares slump on margin guidance

(Sharecast News) - Watches of Switzerland lifted its full-year sales outlook on Wednesday following strong trading in the third quarter, but shares slumped after the retailer cut margin guidance. In an update on the 13 weeks to 25 January, the company said trading was strong across the group, consistent with trends in the first half of the year and with sales growth ahead of expectations.

WOSG said demand for key luxury brands remains strong and continues to outstrip supply in both the UK and the US.

As a result, it now expects FY 2026 sales growth in constant currency of between 9% and 11%, up from previous guidance of 6% to 10%. However, it also cut its profit margin guidance. It now expects the EBIT margin to decline by between 70 and 90 basis points, having previously said it would be flat to down 100 basis points.

WOSG said the updated guidance reflects the impact of brand margin adjustments, product mix, and one-off items relating to Roberto Coin department store debtor provisions. It also reflects infrastructure investments in US ecommerce and group marketing.

The luxury watch retailer said the US delivered sustained broad-based growth across categories, brands and price points, "reflecting the strength of client demand and the effectiveness of the group's operating model".

In the UK, trading conditions across luxury watches and jewellery were consistent with recent periods. The Rolex Old Bond Street boutique maintained its "excellent" momentum, it said, "benefiting from our best-in-class client experience".

Chief executive Brian Duffy said: "I am pleased to report another period of strong performance, building on the sales momentum established in the first half and reflecting strong trading over the holiday period.

"It is particularly pleasing to be achieving these results despite an unusually volatile operating environment, including macroeconomic uncertainty and tariffs, and is testament to the collective contribution of our colleagues which will be reflected through our staff incentive arrangements.

"Looking ahead we remain focused on further cementing our market position across both the US and UK, underpinned by our differentiated model, long-standing brand partnerships and disciplined execution."

At 0945 GMT, the shares were down 2.5% at 501.50p.

Dan Coatsworth, head of markets at AJ Bell, said: "There is a touch of class to Watches of Switzerland's trading update as the luxury goods market regains its poise. Demand for fancy watches has been good enough for the retailer to upgrade sales growth guidance. North America is humming along nicely for the group, and the UK is also looking sweet.

"It feels like Watches of Switzerland is getting back on top after a post-pandemic wobble. In recent years it has faced a multitude of headwinds, from wealthier individuals paring back spending and weaker than expected tourist spending in the UK, to competition from the second-hand market and a period where tariffs were high on certain timepieces it sold in the US. The tone is now more upbeat from the company as it navigates challenges and the backdrop improves.

"The reason why the shares fell on the news is the updated margin guidance, which now lies at the bottom end of previous estimates. This has been driven by investments in the business, product mix and some bad debts. A weaker dollar is also unhelpful given it reports in sterling. It's clouded what is otherwise a reassuring performance."