Barclays has raised its outlook for Watches of Switzerland (LSE:WOSG), noting that affluent U.S. buyers are continuing to absorb tariff-driven price increases. The bank highlighted that downside risks have lessened and the overall risk-reward profile has improved.
“Early commentary from brands suggests that US consumers continue to purchase luxury watches, despite higher prices,” Barclays said, calling the development “incrementally positive” for the investment case.
The brokerage maintained its “overweight” rating on the retailer, setting a price target of 425p versus the September 29 closing price of 365p, implying a potential gain of 16.6%.
Luxury watch brands have taken varied approaches to adjusting prices in response to U.S. tariffs. Patek Philippe raised U.S. prices by approximately 15%, described by Barclays as “at the high end of the range,” while Swatch Group limited increases to 6%–10%.
Swatch CEO Nick Hayek noted that “things are booming in the US” and reported U.S. sales growth of 5% by the end of August. Rolex has not yet raised U.S. prices, but Barclays pointed out that “the solid trading since earlier increases of about 3% was an encouraging signal.”
Barclays highlighted Watches of Switzerland’s trading update for the 18 weeks ending August 31, which showed “strong trading throughout the period, particularly in the U.S.” The bank emphasized that this report predates the latest round of price adjustments following the announcement of a 39% tariff on Swiss watch imports.
In a revised scenario analysis, Barclays said its base case now anticipates a potential earnings-per-share impact of 0%–5% lower, compared with a previous range of 2%–11% lower. The updated outlook assumes supply-constrained U.S. luxury watch volumes remain stable, while unconstrained volumes could fall by up to 12.5%. Price increases are modeled at 13% for supply-constrained brands and 7.5% for others, producing a fair value range of 323p–511p per share, equating to a downside of 9% and upside of 43%.
The bank added, “we would be surprised if Patek introduced such a large price increase if it was seeing a material change in demand/sell out rates,” noting there is no evidence that supply is being diverted to other markets.
Barclays also pointed out that Watches of Switzerland’s U.S. average selling price has historically been about 56% higher than in the U.K., reflecting a wealthier customer base. The company operates in affluent areas including New York, Las Vegas, Atlanta, and Florida.
Watches of Switzerland noted in July that “the US market was less impacted by price increases and has remained strong throughout,” contrasting with the U.K., where significant price hikes in 2023 weakened demand.
Looking ahead, Barclays projected adjusted EPS of 42.6p in fiscal 2026, rising to 48.8p by 2028. Revenue is expected to increase from £1.65 billion in 2025 to £1.93 billion in 2028, with EBITDA margins averaging 11.2%.
The brokerage concluded that the updated analysis reduces the likelihood of more pessimistic outcomes, with the most cautious scenario now implying a 3%–13% downside to EPS, compared with a prior range of 6%–19%.
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