Watches of Switzerland FY25: Strong Revenue Growth but Outlook Cut Due to Margin Pressures
Despite record £1.65bn sales in FY25, Watches of Switzerland lowers FY26 margin forecast amid US tariff impact and market uncertainties
Watches of Switzerland has closed its fiscal year 2025 with solid revenue growth, although signs of margin pressure and a cautious outlook for the coming year have emerged. These results offer insights into the current dynamics of the luxury watch sector, which remains resilient but is increasingly affected by external factors such as tariffs, inflation, and shifting consumer demand.
Steady Revenue Growth Amid Margin Challenges
For the period ending late April 2025, the group reported an 8% increase in revenue, reaching a new record of approximately £1.65 billion. Adjusted operating profit rose by about 12%, but pre-tax profit saw a notable decline due to higher financial costs, increased property investments, and impairments on some assets.
The most significant point concerns the outlook for 2026. Management has revised downward its forecast for the next year, expecting the adjusted operating margin, which is the percentage of profit generated from core business activities before interest and taxes to decline by up to 1 percentage point compared to 2025. To put this into perspective, the adjusted operating margin was around 9.1% in 2025, while for 2026 it is expected to fall to about 8.1% or remain roughly flat. This revision is mainly due to the impact of new US import tariffs, which have forced brand partners to increase retail prices to preserve profitability, a strategy that could affect demand.
At the same time, the company, which generates nearly half of its annual revenue in the United States, also forecast revenue growth of 6%-10% for the year ending April 2026. This guidance assumes that the current 10% US tariff on Swiss imports will remain in place beyond the existing pause on higher levies. This outlook reflects cautious optimism amid ongoing tariff uncertainty and broader macroeconomic challenges.
US and UK Markets
The US remains the group’s main growth driver, with sales rising over 15% year-on-year and surpassing the $1 billion mark for the first time. The acquisition of the jewelry brand Roberto Coin has played a significant role in this performance.
However, part of this growth was influenced by a “frontloading” effect, where distributors accelerated orders ahead of the tariff implementation, creating a temporary spike that could result in slower sales in the second half of the year.
The UK market saw more modest growth of around 2%, benefiting from greater stability after recent challenges. Investments in new boutiques, such as the flagship Rolex store on Old Bond Street, and expansions of mono-brand showrooms have improved competitive positioning. Yet, market maturity and lower tourism continue to restrict expansion potential.
Market Reaction and Future Outlook
Following the earnings release, Watches of Switzerland shares dropped approximately 8%, reflecting investor concerns about margin pressures and macroeconomic uncertainties. Despite management’s positive outlook on its business model and growth pipeline, a cautious approach has been adopted, emphasizing close monitoring of external risks.
Final Thoughts
The Watches of Switzerland results provide a clear picture of the luxury watch sector’s current state. Demand remains present, especially in North America, but is increasingly pressured by external factors like tariffs and geopolitical instability. Brands are raising prices to protect margins, but this approach may limit future growth. Meanwhile, independent retailers face a challenging balance between growing vertical integration by brands and consumers becoming more selective and price-sensitive. The next fiscal year looks demanding, with the group focusing on selective showroom openings, strengthening its branded jewelry segment, and carefully managing volumes and profitability in a market where pricing power is no longer guaranteed and volatility remains high.
