Watches of Switzerland Group
Q3 FY26 Trading Update
4th February 2026
Transcript
Disclaimer
This transcript is derived from a recording of the event. Every possible effort has been
made to transcribe accurately. However, neither Watches of Switzerland Group nor BRR
Media Limited shall be liable for any inaccuracies, errors, or omissions.
Brian Duffy:
Good morning, everyone. Thank you for joining our Q3 FY26 trading update.
This is Brian Duffy our CEO, joined by Anders, our CFO and Caroline, Group
Finance and Investor Relations Director. I'll do some introductory remarks
and then we'll of course open for Q&A at the end of that.
We are really pleased with our trading performance in Q3 FY26, which
obviously covers the key Christmas holiday trading period. Sales were strong
across the group and pretty much a continuation of the strong trends that
we reported in H1. Demand for our key brands remains strong and continues
to outstrip supply in both markets.
In the US, we delivered sustained broad-based growth across categories,
brand and price points. This reflects the strength of our model, and the
continued buoyancy of the luxury watch market in the US. Our growth
projects of pre-owned, ecommerce and Roberto Coin are all performing
particularly well.
We were also delighted to announce the recent acquisition of Deutsch &
Deutsch. This acquisition adds to our presence in Texas with a further four
Rolex-anchored showrooms. We're looking forward to realising the strategic
benefits of this acquisition.
In the UK, trading has also been consistent with H1. We continue to be
delighted with the performance of our Rolex Old Bond Street boutique. This
flagship showroom has consistently delivered strong client engagement and
is attracting a high level of new customers. The group is sharing key insights
from this showroom across the wider estate to support the continued
elevation of best-in-class luxury retail experience.
We've continued to make targeted investments in the business to support
future growth. This has included showroom development projects, of course,
a completely new US based ecomm team, marketing investment and
investments behind Hodinkee. These investments are supporting improved
profitability in the second half and further improved profitability in future
years.
The strong trading performance in the quarter, combined with the early
benefits from our ecommerce and marketing investments, good visibility for
the balance of the year, and the contribution of the Deutsch & Deutsch
acquisition, all gives us confidence to raise our revenue guidance for the
year. We now expect to grow revenue by 9% to 11% constant currency. An
increase from the previous 6% to 10% range that we guided to. EBIT margin
percentage will improve in the second half of the year. For the full year is
now expected to range between a -70 bps to -90 bps versus prior year. This
reflects brand margin adjustments, partially offset by price increases,
investment costs, and some one-off costs. Specifically, we have projected a
provision in the second half of the year relating to Roberto Coin department
store debtor balance following a recent Chapter 11 filing in the US, and staff
incentives reflecting our sales performance.
As noted earlier, the platform infrastructure investments into US ecommerce
and marketing we have made, and Hodinkee, in the year are now largely
complete and will support ecommerce sales and profitability growth in next
year and beyond.
We're really pleased with our trading performance in Q3, year to date, and as
forecast for the full FY26. This is particularly pleasing given the challenges
that our team have faced in navigating what has been a very volatile year.
And with this, we'll hand back to the operator and move on with Q&A.
Operator:
Thank you so much sir. Ladies and gentlemen, if you'd like to ask an audio
question, please press star one on your telephone keypad. Just make sure
that your line is not muted, to allow us to still reach your equipment. So that
is star one for questions. Our first question is coming from Adrien Duverger
of Goldman Sachs. Please go ahead. Your line is open.
Adrien Duverger:
Hi, good morning, Brian, Anders and Caroline, thank you very much for taking
my questions. My first question would be on the product allocation, could
you please comment on the outlook for inventory allocation across the
different brands? Is that in line with your expectations? And secondly, if you
could comment on where you see inventory currently sitting both in the UK
and in the US. Then had another question which would be on the two main
markets. How would you describe the consumer environment across the US
and the UK? And could you please also comment on the exit rates for both of
these regions? Thank you very much.
Brian Duffy:
Thanks Adrien. Obviously, we're in the period in which we get our allocations
from key brands. We've had those discussions, they're not complete at this
point, but we have a pretty good indication that we've clearly reflected in our
four-month projection for the balance of, what now is a three-month
projection for the balance of the year. So, allocations, it's a normal process.
Nothing's really changed and we now have certainty. We obviously have
pricing as well, knowing for what's happened at the start of the calendar
year. Your second question was on inventory.
Anders Romberg:
Yeah, inventory is in good shape both in the UK as well as in the US. In the US
actually we would say that we might be a bit light on certain brands because
some of them were holding back on shipments waiting for the tariffs to
normalise. So, there's been a little bit of a supply issue in the US in that
sense, but overall, we're in a good place when it comes to our stock.
Brian Duffy:
On consumer mood. Here in the UK, I think my own personal view is it is a
wee bit better than it was when we last reported to you. We had the budget
happening in November and your people chat about the Christmas season.
What would it have been like? As it turned out for us was a good season here
in the UK. I think we were really well prepared for it and we made some kind
of nuance change, made a wee bit more emphasis on value, recognising that
that would've been important to the consumer and I think we made some
really good moves there. So, it was a good Christmas season for us overall
and we continue to describe the UK as being stable, which is what we've
been saying more or less for the last 18 months, and maybe as we enter this
new calendar year, my sense is there is maybe a bit of an upturn, a small
upturn in mid, but we'll see. It's early days yet.
US consumer is clearly very buoyant and positive and confident and spending
accordingly. We saw the Bank of America credit card information for January
and again very strong in our category of our luxury jewellery and watches.
The consumer, they're very respondent to value of financial assets which
remain very strong. Obviously, their tax situation is net-net positive as well
when we talk about the more affluent consumer. And there's no question in
the US that the K shaped consumer behaviour is definitely there and evident
in the market. So, the consumer has been positive throughout calendar 25
and that positivity carries into 26 to date.
Anders Romberg:
In terms of the exit rates that we've seen. There's no change in the
momentum going through January, so it's been a good January as well.
Brian Duffy:
Yep.
Adrien Duverger:
Thank you very much.
Operator:
Thank you, Adrien. Ladies and gentlemen, once again if you have any
questions, please press star one. Our next question is coming from Chris
Huang, calling from UBS. Please go ahead. Your line is open.
Chris Huang:
Hello, hi, it's Chris Huang from UBS. I have two questions please. The first
one on the consumer profile, you've been reporting very strong top line
growth and especially in the US that seems to be just continuing to supply to
the upside. Could you provide perhaps a bit more colour on the consumer
profile in terms of their age, how much of a split coming from new versus
existing consumers? Anything you can share on that front would be great.
Secondly, on the margin guidance and the moving parts, if I look at the
midpoint of your new guidance, which is around 10% sales growth, and this
was at the high end of the previous guidance, but at the same time, if we
look at margin expansion, the midpoint now sits 80% below the previous high
end of flattish year over year. I know in the press release you commented
several factors that is driving this incremental 80 bps headwind, but would
you be able to quantify each of them, if possible, and also connected to this if
we should expect any further headwind into fiscal 27 please. Thank you.
Brian Duffy:
Yeah, thanks Chris. Consumer profile, I think we have reported to the market
consistently that we're really encouraged by a younger demographic in the
US. I think people get affluent younger is one thing, but I think there's huge
interest in the world of luxury watches with the young consumers in the US
and it is our experience, even at the high end of the price ranges of what we
sell. Those are very active, younger consumer, very knowledgeable about the
category. We obviously have now our Hodinkee media business, which again
has a younger appeal overall and we can get further consumer insight there
into those that really love and appreciate the wonderful world of watches. So
yes, it's a really encouraging thing that younger consumers really appreciate
this category, appreciate mechanical watches, appreciate that the products
maintain value, that they last whatever, they're not disposable products and
it's a real positive for the category.
The last thing on that is I think the influence of digital media as well clearly
has a younger profile appeal to and our category lends itself very well to
digital communications through advertising, through social media, through
great videos in which you can talk about heritage and craftsmanship and
modern techniques and celebrity ambassadors. I mean everything about this
category communicates very well through your laptop or your phone. So
definitely a younger consumer, trend towards more women buying into the
category, which is great. Much more self-purchase. The last thing about the
US to mention a big difference, there's a bigger concentration of collectors in
the US than we have experienced here in the UK, so about 25% of our
business in the UK. It's nearer half of our business in the US, so really positive
things in the US that give us great confidence about the future of that
market. It remains an underdeveloped market measured on a per capita
basis and the rate of growth for the market overall and for our business is
very strong. You want to comment on..
Anders Romberg:
In terms of the margin profile for the second half, it's improving, from what
we saw in the first half. A couple of headwinds that came our way was
obviously the Chapter 11 that Brian alluded to earlier with one of the
department stores in the US. We’ve taken a prudent view on that and
provided for it in our guidance. In addition to which we've had a great year,
the team has done a fabulous piece of work throughout the whole year and
that's led us to taking up our variable compensation slightly versus what we
expected. In addition to which we had a product mix with pre-owned
continuing to motor on really well across both markets and obviously it
comes at a slightly lower product margin, even though it's cash accretive
from an EBIT margin perspective, obviously you don't get the same flow
through.
Brian Duffy:
And there's some one-off costs there too. There has been an impact from
margin. Obviously, the brands have had to respond to pretty unprecedented
levels of cost inflation with the price of gold, with the strength of the Franc,
the weakness of the dollar, and then you throw tariffs on top of that. So, it
was a lot to navigate for the brands. I think they've been very responsible in
how they've done it overall, but that has included an element of margin
adjustment for us retailers. It is offset by pricing over time, but within the
fiscal year it has a negative impact in this year. We think it washes through
next year. And we have a one-off course like NIC of course that we've
reported before in the UK.
Chris Huang:
And sorry, just to follow up on that Chapter 11 of one of your partners, are
you able to tell us how much of a headwind you currently baked in? So we
kind of know the sensitivity to that.
Anders Romberg:
No, we're not going to specifically comment on that, but it is obviously not
helpful.
Chris Huang:
Okay, thank you.
Operator:
Thank you for your questions, Chris. We'll now go to Kate Calvert of Investec.
Please go ahead.
Kate Calvert:
Morning everyone. Just a quick question on your project pipeline because
there wasn't any comments in the statement that I remember. Have you got
any delays to your project pipelines for the current financial year or is all on
track and what are your early thoughts on next year's project pipeline? Thank
you.
Brian Duffy:
Thanks Kate. No delays. We have our usual full programme of activities both
here in the UK and the US. We obviously have our new business now with
Deutsch & Deutsch separate to store projects. We have a lot going on with
Hodinkee. We've opened now three stores with Roberto Coin, which look
fabulous. I was in the states last week with a Roberto Coin team in source,
our store in Miami, which is really great. And we have other projects there
too. We have ecomm that we are moving onto a Shopify platform currently.
We have Watches of Switzerland on the platform. We'll have Mayors on that
platform too within the coming weeks. So yeah, hands are full. We got a lot
on and yeah, no change, no delays, some really nice projects both here in the
UK and the US coming up in the year ahead.
Kate Calvert:
Can you give any more details on those projects in the year ahead?
Brian Duffy:
Yeah, so in our Q3, we've changed the cadence of our reporting. We give a
lot more information on our half year number, so we haven't gone through
what we have done historically enlisted. There's no change to what we
presented and listed in the half year at this point. Big projects here in the UK,
the Glasgow boutique is a big deal, that's on schedule for an opening in early
summer. That activity at Heathrow we're working on. We haven't landed on
an exact date for that, but we're advanced with Rolex on the design of all of
that, so that's great. We're working through and we'll have completed pretty
much for the end of this next fiscal year, the whole upgrade that we did to
Goldsmiths, and Mappin & Webb here in the UK. So yeah, looking back to H1
is probably your best reference at this point and obviously we'll update as we
complete Q4 here.
Kate Calvert:
Always worth a try. Thank you very much. Thanks.
Operator:
Thank you for your questions, ma'am. Ladies and gentlemen, as a final
reminder, if you have any audio questions, please press star one on your
telephone keypad. We’ll now go to Melania Grippo of BNP Paribas. Please go
ahead.
Melania Grippo:
Good morning, everyone. This is Melania Grippo from BNP Paribas. I've got
one question on your recent acquisition of four stores in Texas. I was
wondering if you could please give us an idea of what could be the store
revenue uplift after the refurbishment and integration in your group?
Brian Duffy:
We can't really, well, honestly, we don't know at this point. It's a very recent
acquisition. Clearly our focus in these first few weeks is securing and
answering all the questions from the team that are there. They're great
people. We've had really good interactions and all that's going fine. We really
believe that the format that we've done here of the owners staying in their
roles, running the business and staying with an equity interest in the business
is a really good format for the nature of acquisition in this category of family
businesses. So, we're working through all that. We would say they've done a
great job of refurbishing two of the four stores. They look fabulous, but
there's a lot of things that we can bring to their network, whether it's online,
pre-owned and some other brand developments of that nature. So, we're
working through it. We haven't clearly done budgets with them at this point
yet, but we have them scheduled and yeah, we'll hopefully be able to answer
that more in the future.
Melania Grippo:
Thank you.
Operator:
Okay. We do not have any further questions coming in at this time. I'll turn a
call back over to management for any additional or closing remarks. Thank
you.
Brian Duffy:
Thanks again everybody for joining the call. Huge thanks to our team for
navigating through what's been an interesting and I think volatile year. We
are looking forward to more stable conditions as we plan our fiscal year 27
but feel very good about where we've got to in this year. So, thank you for
joining us.
