Watches of Switzerland Group plc

Good morning and welcome to the Watchers of Switzerland Group's FY26 Trading Update webcast. We're joined this morning by Brian Duffy, Chief Executive Officer, and Anders Romberg, Chief Financial Officer. If you would like to ask a question during today's call, please press star 1 on your telephone keypad. I'll now hand over to the Watchers of Switzerland Group management team, Brian Duffy. Please proceed.

Thank you Dom and good morning everyone. Thanks for joining our full year fiscal 26 trading update call. A few introductory comments from me and then we'll open the line for your questions for myself and Anders. Our group sales coming in at plus 13% in constant currency, plus 11% in reported. A total of £1.83 billion. We're ahead of the high point of our guidance and of market consensus. H2 growth trends were marginally better than H1 despite being up against tougher comps. We expect a just EBIT of between 152 and 155 million also ahead of expectations. Our team delivered great results navigating through challenges including changing import tariffs, gold price inflation and some other challenges. They really did a great job.

Sales in the U.S. are 1.24 billion.

We're 24% up in prior year and the U.S. is now more than 50% of group sales. This is a major milestone for our group achieved in just eight years since we entered that market. The U.S. luxury watch market is the largest and fastest growing major market globally and we continue to see the market as underdeveloped. The high income segment in the U.S. has benefited from significant increases in wealth due mainly to the appreciation of financial assets and the luxury watch market in the US is buoyant. The US luxury jewellery market is also the number one market globally and our RobertoCoin wholesale business has shown great sales progress at plus 22% in USD for the year. The RobertoCoin brand performed very well in our Merced stores. in Florida and the three new monobrands, the new website all performing in line with our expectations. Our acquisition of the Deutsch & Deutsch four stores in Texas has proceeded well and the business is performing well too. In the UK, sales have improved in H2 and we continue to view the UK luxury market as stable. Sales for the year were plus 5% and we had a particularly stronger year for luxury jewellery. Looking ahead to fiscal year 27, we're carrying in strong momentum and good confidence into the year. Our guidance is for sales growth of between 5% and 10% in constant currency. That is, of course, 52 weeks on prior year of 53. If we adjust for that, the guidance we're giving is between 7% and 12%. And we're getting into a profitability improvement of between 40% and 80% compared to fiscal year 26. Our growth pillars are all performing well and we have a strong pipeline of projects in the UK and US. We look forward to another year of record growth. Many thanks to our wonderful colleagues for showing again their commitment and enthusiasm, excellent client service and delivering these strong results for fiscal year 26.

So with that, we'll open the line for your questions.

Thank you. If you would like to ask a question, Please press TOW on your telephone keypad. We'll take our first questions from Chris Huang from UBS. The line is open. Please go ahead.

hello hi it's Chris Hong from UBS and first of all congratulations on the results I have two questions the first one may be on the UK I mean the momentum of the UK market seems to be turning as you said seven percent in H2 for the region could you perhaps help us understand better the regional expectations you baked in for the FY27 guidance I'm asking because your comms gets um quite easy in h1 um so would it be fair to assume maybe some further acceleration in the uk um even into the double digit range in h1 um secondly on the us um we saw in h2 another very impressive half year so i'm just wondering here if you could help us understand and the underlying drivers of the growth of this 27% in H2. How much was driven by new stores and how much by the uplift in average selling price and volumes within the existing stores, please? Thank you.

Thanks, Chris. UK market is good and we characterise it as stable it's stabilised in fiscal 25 which we reported we continue to see it as stable we have picked up a bit of momentum we have areas in which we are performing very well you know our Bond Street Rolex flagship store is doing extremely well very proud of the performance and particularly the feedback from clients on that store which really couldn't be better so that's a great success e-com business in the UK is doing very well and we had a real standout performance in jewellery and it's honestly it's just a lot of the good things that we're doing across our network we have the year two, year three of major expansions that we've done in prior years, seeing the benefit of them coming through. We don't split our guidance by market, so we can't tell you what the assumption was for the UK. Other than to say that we're carrying good momentum and we see the market is stable, we see it is continuing to be so for the year. There's obviously disruption around politically or whatever but honestly we see the circumstances that we're in today is better than they've been in the last couple of years with the amount of instability that there's been overall US market is on the other hand very strong for reasons that I said the underdevelopment of the category the watch category in particular and the very kind of positive frame of mind of the high income consumer combining to create good market conditions again we carry into the year experiencing the new year experiencing those conditions we're up against tougher comps of course and we project forward our business based upon what we're experiencing but obviously the comps that we're up against are going to be that bit tougher so our advice would be not to you know this is our best call for the market is the guidance that we're giving we wouldn't get carried away beyond that at this point obviously things get on in the world that can still affect the climate that we're doing business in but the ESP and pricing we can get back to you on the average price for the year Most of the pricing action that we saw as a result of the tariffs impacted this last fiscal year FY26 predominantly

and there has been a few price adjustments due to the gold price and that's the part of the segment in watches that has been somewhat impacted but it's not been the materiality that we saw in last fiscal year yeah and we never anticipate price increases you know that and they generally happen at the start of the calendar year not always but they generally happen at the start of the calendar year but we never assume it you know in our numbers

Thank you. Our next question comes from Richard Taylor from Barclays. Your line is open. Please go ahead. Richard Taylor from Barclays. Your line is open. Please go ahead. We'll move to the next questions from Adrian Devinder from Goldman Sachs. Your line is open. Please go ahead.

Hey, good morning, Brian, Andrew, and Caroline. I just wanted to thank you, Caroline, for the work we've done together over the last few years, and good luck in your next endeavor. I have a couple of questions, if possible. The first one is if you could please comment on the Momentum X weight-listed products, both in the UK and in the U.S., and my second question would be with regards to the pre-owned category. So relative to your mid-term targets, how is Rolex CPO progressing? Are you now selling Rolex CPO in all of your stores, both in the UK and in the US? And is it still the second biggest brand in the group nowadays? Thank you very much.

thanks for your questions the situation with regards to the mix of our business on the supply constrained sector of our business has been very steady again with the demand in the US we could be selling everything to waitlist clients for those brands case of the UK as we've reported we have an element of a walk-in business and an element of stock that's available again that seems to be steady it's a very good experience obviously for our sales people and clients at least they have some access to products so a big part of our business is highly predictable because it is based upon supply and it's based upon the list that we have we continue to add to the list UK and US when new products come along following Watch and Wonders we get another wave of of additions to the list and that happened of course this year with the new products that were announced in Geneva so it remains very steady and a core part of our model and mix. Pre-owned is going very well it's at least in line with what we would have expected it to be maybe even a wee bit better in the case of the US we're in awe of the doors for Rolex CPO in the UK we have a few more doors still to add that we'll do in this fiscal year it's really just going to matter of when are we reorganising or relaying out the store and we obviously coincide the development with that so we have a few doors to add yet in the UK it's a core part of our business sorry D&D yes and the other thing I'd emphasise we have Rolex certified pre-owned business that's going very well and the other brand pre-owned business is also going very well so as a category it is our number two brand if you like from that standpoint and a great business for us we are learning more and more as we go developing more and more relationships and obviously developing a great awareness for our clients who are coming to to experience some really interesting product that we can now present it's been a particular success in Bond Street again if you've been there we have a beautiful presentation of very interesting products to see and understand quite apart from shopping we have clients coming to us asking to source vintage products and so on so it's really great space for us A new acquisition in Texas, Deutsch & Deutsch, will be bringing certified pre-owned to them as well as some other elements of business that we can add. So it's a really good category and it's contributed well to our growth over the last couple of years including fiscal 26.

And to add to that, the team is getting better and better at procurement and stock management.

so the health of our inventory has never been as good as it is today and the market that I'm sure you track is very stable as well from a pricing standpoint following that case of volatility of 22 and 23 thank you very much thank you as a reminder if you would like to ask questions please press star 1

We are now taking our next questions from Kit Calvert from Investac. The line is open. Please go ahead.

Good morning, everyone. I've just got a question on Roberto Corrin. I was wondering if you could update and give a bit more detail on the four Monastor trials, how they're going and performing and sort of expectations for the year ahead. And also perhaps update on progress with discussions, getting more space in some of your wholesale partners. Thanks very much.

thanks Kate the old Roberto coin business with us we're very very pleased with the integrations the collaboration that we have with the teams in Italy with Roberto himself and his family and the team under Peter Webster in the US that we're obviously getting to know the four monobrands there's three at the moment with a fourth coming in Tampa all going well the website as well as Roberta Coyne DTC going very well what's going extraordinarily well is the expansion of Roberta Coyne within the mares group where we've installed you know shopping shops and you know clearly the training and really focused on the merchandising and so on and we're using to your last point we're using these experiences these projects they clearly then take them out and present to our other wholesale partners and we've more than doubled the business in the mails stores from what we've done and it's become a very important brand and even comparing well to and exceeded actually the productivity of some major brands in the stores so so it's great but I'm off to Vegas in a couple of weeks the biggest event of the year is the consumer GCT event takes place in Wynn where we happen to have our stores we have a lot of meetings set up with our big department store partners and our big independent retailers we have a program of expansions that we're working on obviously they all take time to negotiate to get the space to procure the furniture and everything else so we're on it and delighted with the results that we got last year delighted with the fact that we continued to do well despite the fact that we had to put prices up obviously since it's predominantly gold the product and you know it's going to be an important part of our business and obviously makes a disproportionate contribution from a profits standpoint since we have both the wholesale and retail margin when we do this direct-to-consumer business and the standalone wholesale business is nicely profitable as well. You know that the business that we acquired was a 20% EBIT business. So, yeah, very, very positive about the burden.

Great. Thanks so much. Have fun.

Thank you. Thank you. We are now moving to our next questions from Richard Taylor from Barclays. Your line is open. Please go ahead.

Yeah, morning. Hopefully you can hear me this time.

I've got a question on the margin guidance. I know you have the Roberta coin debt and it was talked about in the Q3 statement.

So just keen to understand how much of the 40 to 80 bits of this you're talking to is an underlying improvement versus some of that online. Thanks very much.

but we never really disclosed the absolute number for vertical but obviously the write-off that we had to take as part of the chapter 11 proceedings which now is closed by the way we don't expect that to annualize next year obviously so that has a slight impact so you can make up your own number but I think it's out there so I know most analysts have put in around 3 to 4 million for that so that's a benefit that we'll have next year The rest of the margin expansion is coming from operational leverage, which is historically how we've driven the profitability in this business over more than a decade actually. So it's coming from that, the margin expansion, and we expect that to contribute to the 60 bits, which is the midpoint.

brand mix is a great thing that we have been a multi-brand with a true multi-brand retail in the main and we're able to change the mix of our product as we go and we've had some really great success and we've reorganised the mix of our brands in terms of productivity and a margin impact we continue to look at our store portfolio as well so yeah a few things contributing to the improvement that we are

dating to correct thanks very much thank you as a reminder if you like to ask question please signal by pressing star 1 on your telephone keypad we are now taking our next questions from Pirault, Albania, from RVC. Your line is open. Please go ahead.

Great. Thank you. Morning, everybody. Congratulations on a great print. I had two quick questions, please. The first one relates to the 2027 guidance, the 5% to 10% revenue growth ambition. Could you help us understand how we should think about the price versus volume split? And then the second question relates to potential U.S. tariffs refunds. Is there any benefit accruing to Watches of Switzerland from that or is there any way in which you could leverage your supplier partners to help you with Apex or OpEx contributions against any potential windfall coming from that side? Thank you.

I'll take the second one first. The tariffs obviously are paid by the brands importing the product, not paid directly by us in terms of our watch brand partners. to your point it takes the pressure off that was there from them in terms of pricing and margin and of course as we discuss projects with them and plans and so on with them we're well aware that the tariff situation is now much more favourable to what it was at one point in fiscal 26 and what we might have feared going forward this specific for us is the implication of the Delta coin product and of course we've made our applications and working on that as we speak but we don't pay the watch at us directly.

In terms of pricing obviously we've seen more less aggressive pricing coming through from the Browns this year than what we saw last year where Browns were making up for the cost of the tariffs and the price of gold that was skyrocketing. So in our guidance, there is a component of pricing that is rolling forward. So, for instance, a brand like Casio took the pricing up in September of last year by 10% in the U.S. Obviously, that benefits us in the first half of this fiscal year. We always incorporate the pricing that we know of. We do not include any pricing that hasn't been announced by the brands. So to answer your question, it's going to be a mix of price and volume that's going to drive our growth in the next fiscal year.

Okay, thank you. And sorry about the echo before.

No problem. Thank you. That's all we have from our conference audience. I'd like to turn the conference back to the management team for any additional or closing remarks. Please go ahead, sir.

thank you do we have some other questions that have come in online we have no webcast questions at the moment okay thanks again for joining the call everybody and then you know a particular thanks to our team for managing their way through what has really been a bit of a volatile year that we really feel is settled down through the year and carries a more stable perspective in fiscal 27 that we're now in. The teams have done an absolutely amazing job but obviously very well positioned. We are now in more than 50% US business. It is the best market to be in. right now long may it continue but we're confident to get into a year that we think is a lot more predictable than we might have experienced over the last few and I appreciate your support and interest in our business