Even though most of the best-performing stocks so far in 2026 have come from the AI and tech space, other stocks have done well. In fact, one FTSE 250 stock has caught my eye after a strong 50% gain already so far this year. So what are the details?
Reasons for optimism
The company I’m referring to is the Watches of Switzerland Group (LSE:WOSG). The stock had been underperforming for some time, mainly around concerns over slowing luxury demand and weaker profit margins. However, that picture’s now changing.
Back in May, a full-year trading update said the company noted “growth accelerating across the business and strong underlying momentum as we continue to scale”. The stock’s easily beating the broader FTSE 250, which is up 3% so far this year.
Even though some in the UK might be sceptical about the demand for luxury timepieces, it’s actually the US market that’s been driving results. The US was referred to in the update as “the primary engine of growth“, with revenue up 24% in constant currency to £927m and now accounting for over half of Group sales.
It’s true that luxury watches remain highly desirable among affluent American consumers, and Watches of Switzerland has invested heavily in expanding its presence there. It’s also being helped by acquisitions such as Roberto Coin’s North American jewellery business.
Another reason investors have become more optimistic is that the company isn’t only targeting people to buy new watches, but is pushing cheaper pre-owned alternatives. This not only opens up the market to more people, but can help yield results in markets where consumers might be tighter with spending.
It’s clearly working, with pre-owned sales up 22% versus the prior year, and a continued focus on the roll-out of Rolex Certified Pre-Owned in the UK portfolio.
What lies ahead
The shares could continue rising if several things go right. The big factor would be whether luxury demand can continue to recover as consumer confidence improves (especially in the UK). Next, the US expansion could continue driving higher-margin growth, which now would have a much larger financial benefit given its size overall.
Incredibly, the stock’s still down almost 50% from the start of 2022, suggesting there’s significant scope to rally before the share price looks overvalued.
However, there are risks. Luxury spending is cyclical, and expensive watches are among the first purchases consumers delay during economic slowdowns. Even though the US market’s doing well, the outlook for us here in the UK and other geographies for the firm isn’t that rosy.
So on balance, even though the stock’s doing well relative to the market, I’m not sure I need a luxury consumer discretionary stock in my portfolio right now. On that basis, I’m going to pass on this opportunity.
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Jon Smith has no positions in the shares mentioned.
