Watches of Switzerland (LSE: WOSG) shares appear to be back on investors’ must-have lists, up 55% over the past five years. That includes a sharp 15% jump Thursday (14 May), on the back of a trading update ahead of full-year results — due 14 July.
We are still looking at a 13% fall over five years. And the share price is down more than 60% since those giddy heights around the end of 2022. But it did look like the stock had been getting a bit over-hyped at the time. And a growth stock’s second wind can often be the real thing.
So are we at the start of a sustainable long-term upwards spell now? Let’s dig into this latest update.
Full-year highlights
“FY26 marks another year of record revenue performance, up 13% in constant currency to £1.8 billion, with growth accelerating across the business and strong underlying momentum as we continue to scale … The US continues to be the primary engine of growth, with revenue up 24% in constant currency to $1.24 billion and now accounts for over half of group sales.”
— Brian Duffy, Watches of Switzerland CEO
Full-year revenue rose 13% to £1,828m, at constant currency — or 11% at actual exchange rates. Luxury watch revenue gained 13%, with luxury jewellery revenue up 18% — both at constant currency.
Management expects full-year adjusted EBIT in the range of £152m to £155m, and that’s better than earlier guidance.
Net debt at the end of the year came in at £57m, which is a fair bit lower than the £96m at the end of the previous year. But that does move the company from a marginal net cash position two years ago, after the acquisition of Roberto Coin and Hodinkee in fiscal 2025 and Deutsch & Deutsch this year.
Expansion, especially funded by debt, can need an eye kept on it. But these are relatively small debts for a company with a £1.4bn market cap. So I’m not really concerned right now.
Should investors consider buying?
Higher gold prices have been inflating costs in the luxury products market, and that’s been squeezing margins over the past couple of years. The company, however, does expect a rise in adjusted EBIT margin in the 2026-27 year of 40-80 basis points.
But we really do need to keep an eye on cost pressures — especially considering the importance of the US market, and the somewhat erratic US tariff outlook.
The big question for me is whether the current valuation allows sufficient safety room to cover current uncertainties.
Forecasts put the price-to-earnings ratio at 15 (adjusted for the latest share price jump). And that would drop to 11.8 based on expectations out to 2028.
Discretionary spending
We need to keep in mind that spending on luxury goods can be fickle. And any lengthy new spell of inflation could lead to weaker demand.
Still, when geopolitical turmoil finally subsides, today’s valuation could turn out to be a bargain. This really could be a pivot point for Watches of Switzerland shares. And I suspect growth investors with a bit of risk appetite could do well to consider this one.
