It's definitely a value name at this point, and probably does not need a lot to do ok. I worry though that after the covid peak we have a pretty depressed luxury watches market, I have a few friends who were on waiting lists who refused the watches when they became available. And then of course there is always the risk Rolex becomes more agressive with Bucherer by keeping the daytona etc for themselves.
Looking forward to seeing your future updates on this one!
Thanks for your thoughts. From considering how luxury watch makers price their product, think long term, as well as an interview with Omega CEO, I strongly believe that even with 35% tariffs, prices won't be hiked for the U.S
Top luxury watch makers like Omega, Rolex, AP, PP want price parity in all countries they sell, so local buyers don't travel abroad to by cheaper products. Omega CEO said on tariffs that they would keep price parity. As a recent WatchPro article said, which I believe also, manufactures will likely increase global prices a few %, take the hit on U.S margins, maybe with WOSG taking a bit of margin off (but in my view mostly the manufacturer).
So I don't see prices going up in the U.S (except with a global small % increase) and with normal conditions, sales wouldn't be affected. No, of course we have lots of caution now and a possible recession which could affect things.
Also worth considering that WOSG sales is circa 50-60% waitlisted watch brands like Rolex, AP and PP, ie supply constrained, so in my view sales of these won't be affected much at all.
I agree, manufacturers will need to take a much higher take than retailers. At the end, retailers need to remain profitable.
I believe Rolex could have room in the U.S. as I believe I saw in a post that the prices in that region are higher than others.
It’s a core market and both manufacturers and WOSG will do the necessary to remain profitable.
That will be in the 31% tariff scenario. We still need to see this scenario as the definitive, which is currently unlikely based on what we can read online.
As an addition, I saw a interview with Kevin O'leary, who was with the CEOs at Watches of Wonders when tariffs announced. Supposedly they said initially they would pull inventory until the situation was clearer. But Kevin pushed back at them and said keep shipping to the U.S, the consumers still really want your watches.
Obviously it's just a initial conversation and not a actual implemented plan, but something extra to think on.
I previously held a position in the company but exited after what I viewed as negative developments—despite a strong price rally to around 570p following a disappointing earnings report (https://www.moatmind.com/p/exit-position-watches-of-switzerland).
What’s your take on management’s ambitious growth targets? Could this approach backfire and turn into a case of “growth at any cost”?
Thanks for the well written and clear writeup.
It's definitely a value name at this point, and probably does not need a lot to do ok. I worry though that after the covid peak we have a pretty depressed luxury watches market, I have a few friends who were on waiting lists who refused the watches when they became available. And then of course there is always the risk Rolex becomes more agressive with Bucherer by keeping the daytona etc for themselves.
Looking forward to seeing your future updates on this one!
Thanks for your thoughts. From considering how luxury watch makers price their product, think long term, as well as an interview with Omega CEO, I strongly believe that even with 35% tariffs, prices won't be hiked for the U.S
Top luxury watch makers like Omega, Rolex, AP, PP want price parity in all countries they sell, so local buyers don't travel abroad to by cheaper products. Omega CEO said on tariffs that they would keep price parity. As a recent WatchPro article said, which I believe also, manufactures will likely increase global prices a few %, take the hit on U.S margins, maybe with WOSG taking a bit of margin off (but in my view mostly the manufacturer).
So I don't see prices going up in the U.S (except with a global small % increase) and with normal conditions, sales wouldn't be affected. No, of course we have lots of caution now and a possible recession which could affect things.
Also worth considering that WOSG sales is circa 50-60% waitlisted watch brands like Rolex, AP and PP, ie supply constrained, so in my view sales of these won't be affected much at all.
Hi Jack, that is a very interesting comment.
I agree, manufacturers will need to take a much higher take than retailers. At the end, retailers need to remain profitable.
I believe Rolex could have room in the U.S. as I believe I saw in a post that the prices in that region are higher than others.
It’s a core market and both manufacturers and WOSG will do the necessary to remain profitable.
That will be in the 31% tariff scenario. We still need to see this scenario as the definitive, which is currently unlikely based on what we can read online.
So yes, market might be overreacting.
Indeed. In my view, tariffs as stand will have a moderate impact on WOSG, and upside room for negations on tariffs for sure.
Longer term view, it's mainly if a moderate reduction in OCF causes them to have to scale back on growth plans or not.
Unfortunately they don't have a cash chest to do buybacks with at larger levels
As an addition, I saw a interview with Kevin O'leary, who was with the CEOs at Watches of Wonders when tariffs announced. Supposedly they said initially they would pull inventory until the situation was clearer. But Kevin pushed back at them and said keep shipping to the U.S, the consumers still really want your watches.
Obviously it's just a initial conversation and not a actual implemented plan, but something extra to think on.
That was a great update, thank you!
I previously held a position in the company but exited after what I viewed as negative developments—despite a strong price rally to around 570p following a disappointing earnings report (https://www.moatmind.com/p/exit-position-watches-of-switzerland).
What’s your take on management’s ambitious growth targets? Could this approach backfire and turn into a case of “growth at any cost”?