Watches of Switzerland Group's recent earnings call revealed a strong performance for the third quarter of fiscal year 2026, driven by sustained demand for luxury timepieces in both the US and UK markets. The company has revised its full-year revenue growth projections upwards, reflecting confidence in its strategic initiatives and recent acquisitions.
Elevating Luxury: A Strong Quarter and Bright Outlook for Watches of Switzerland
Solid Performance Across Key Markets Fuels Optimism
Watches of Switzerland Group demonstrated impressive trading results in the third quarter of fiscal year 2026, as confirmed by Chief Executive Officer Brian Duffy. He informed investors that the positive momentum established in the first half of the year continued seamlessly through the crucial Christmas shopping season. This robust performance was a central theme of the call, which also featured insights from Chief Financial Officer Anders and Group Finance and Investor Relations Director Caroline.
Unwavering Demand and Enhanced Full-Year Projections
The management team emphasized the persistent strength of demand for its core brands, noting that it continues to exceed available supply in both the American and British markets. Consequently, the company has elevated its full-year revenue growth forecast. This optimistic revision is based on the strong quarterly showing, the initial positive impacts of recent investments, and the strategic contribution from the newly acquired Deutsch & Deutsch business.
American Market Leads with Broad-Based Expansion
Duffy lauded the United States market for its consistent and widespread growth across various product categories, brands, and price points. He attributed this success to the effectiveness of the group's operational model and the enduring vitality of the luxury watch sector. Notably, he highlighted the exceptional performance of pre-owned watches, e-commerce platforms, and the Roberto Coin brand as significant drivers of growth.
Consistent UK Trading and Elevated Customer Experiences
In the United Kingdom, Duffy indicated that trading patterns aligned with trends observed in the first half of the fiscal year. He specifically commended the strong performance of the Rolex Old Bond Street boutique, which has successfully fostered deep client engagement and attracted a considerable number of new customers. The valuable insights gained from this flagship location are being disseminated across the wider retail network to further enhance the luxury shopping experience.
Consumer Confidence Bolsters Sales in Key Regions
Regarding the consumer landscape, management characterized the UK market as stable, noting a slightly improved sentiment compared to the previous update. Duffy mentioned a strategic focus on value during the Christmas period, which resulted in a successful holiday season for the company in the UK. In the US, Duffy described consumers as "very buoyant, positive, and confident," with spending remaining robust. He referenced Bank of America credit card data from January, which underscored the strong performance in luxury jewelry and watches, indicating continued momentum into the new year.
Strategic Investments and Acquisitions Drive Future Growth
The company now anticipates full-year revenue growth of 9% to 11% at constant currency, an increase from the previous range of 6% to 10%. Duffy explained that this improved outlook is a direct result of strong quarterly trading, the early benefits realized from e-commerce and marketing investments, clear visibility for the remainder of the year, and the contribution from the Deutsch & Deutsch acquisition.
Navigating Margin Adjustments and Cost Pressures
While the company expects an improvement in its EBIT margin percentage in the second half of the year, the full-year margin is projected to decrease by 70 to 90 basis points compared to the prior year. Management attributed this revised margin outlook to several influencing factors, including brand margin adjustments partially offset by price increases, ongoing investment costs, and certain one-off items. Anders detailed specific headwinds, such as a prudent provision related to a Roberto Coin department store debtor balance following a Chapter 11 filing in the US and higher variable compensation tied to sales performance. Duffy also acknowledged the impact of unprecedented cost inflation, driven by factors like gold prices, currency fluctuations (Swiss franc and US dollar), and tariffs, which have led to retailer margin adjustments expected to normalize in the coming year.
Optimized Inventory and Evolving Customer Demographics
Management confirmed that inventory levels are well-managed in both the UK and the US, although Anders noted a slight shortage in certain brands in the US due to suppliers withholding shipments during tariff normalization. Duffy highlighted an encouraging trend of a younger demographic showing strong interest in luxury watches in the US market, including at higher price points. He also pointed to the Hodinkee media business as providing valuable insights into this younger enthusiast base. The influence of digital media and social platforms was also noted, with the category effectively communicating its heritage and craftsmanship through these channels. An increase in female buyers and self-purchases was also observed.
Strategic Expansion Through Acquisitions and Project Pipeline
The group expressed its delight in acquiring Deutsch & Deutsch, which adds four Rolex-focused showrooms in Texas and expands the company's presence in the state. While it's too early to quantify the revenue uplift from refurbishment and integration, Duffy stated that the immediate focus is on supporting the existing team. He explained that the acquisition structure, which retains the owner with an ongoing role and equity interest, has proven successful for family businesses in the sector. He also noted that two of the four stores have already been refurbished, and the group plans to integrate capabilities like online sales and pre-owned offerings into the acquired network. The broader project pipeline remains on schedule, with initiatives including the migration of e-commerce to a Shopify platform, the opening of a Glasgow boutique, and ongoing work on a Heathrow project with Rolex.
Looking Ahead: Stability and Continued Growth
Concluding the call, Duffy extended his gratitude to the company's teams for navigating a volatile year. He expressed management's anticipation of more stable market conditions as they plan for fiscal year 2027. The Watches of Switzerland Group, established in 2007, is the UK's largest luxury watch retailer, operating eight prestigious brands across the UK and US, along with exclusive distribution rights for Roberto Coin in several regions since May 202
