Feb 4 (Reuters) - Luxury retailer Watches of Switzerland raised its annual sales forecast on Wednesday, citing robust demand for the company's key luxury brands in the U.S. and the UK markets. The
Watches of Switzerland Faces Margin Pressure Despite US Sales Surge
Impact of Rising Costs on Profit Margins
By Simone Lobo and Sri Hari N S
One-Off Costs Affecting Margins
Feb 4 (Reuters) - Watches of Switzerland said on Wednesday its profit margins were being squeezed by surging precious metal costs and one-off charges linked to bankrupt Saks Global, weighing on its shares even as strong U.S. demand lifted its sales outlook.
Sales Outlook and Consumer Trends
The luxury retailer, which sells Rolex, TAG Heuer and Audemars Piguet watches among others, now expects operating margins for the year to April to fall 70–90 basis points, having previously guided for flat to down 100 basis points.
Its shares were down 3% in morning trade.
"There's been a bit of a squeezing of our margin as a result of commodity pricing," CEO Brian Duffy told Reuters.
ONE-OFF COSTS
Duffy said higher supplier costs driven by rising gold prices had weighed on margins this financial year, though he expects retail price increases to offset the impact over time.
Precious metal prices have surged to record highs as investors flock to safe-haven assets amid tariffs and geopolitical tensions, pushing up production costs for watchmakers and raising the price of finished timepieces.
Watches of Switzerland said its margin forecast also reflected one-off items tied to debtor provisions at Roberto Coin department stores. Roberto Coin, whose North American operations it acquired in 2024, holds credit exposure to bankrupt U.S. luxury retailer Saks Global.
SALES OUTLOOK UPGRADED
The company expects annual sales on a constant-currency basis to rise 9–11%, up from its previous 6–10% range.
Third-quarter sales, including the key holiday period, came in ahead of expectations as demand continued to outstrip supply in both the U.S. and Britain.
Consumer spending trends in the U.S. show lower‑ and middle‑income households remaining cautious amid inflation and economic uncertainty, while affluent buyers continue to spend on luxury goods.
(Reporting by Simone Lobo and Sri Hari N S in Bengaluru. Writing by Yadarisa Shabong. Editing by Sherry Jacob-Phillips and Mark Potter)
