WOSG's 4Q trading update was solid, and Goldman Sachs maintained its Buy rating

Overview

This report is Goldman Sachs' initial take on Watches of Switzerland Group's 4Q trading update and 2H/FY26 earnings snapshot. Revenue came in above management guidance, Visible Alpha consensus, and Goldman Sachs estimates, especially with strong growth in the US. Management also provided FY27 guidance, with revenue growth broadly in line with expectations but more favorable margin expansion and capex guidance.

Core views

Goldman Sachs views the update as solid; its main takeaway is that trading performance beat expectations, and demand for key luxury brands in the US and UK still exceeds supply. FY26 adjusted EBIT guidance is above prior expectations, and FY27 profitability guidance is also better than the market expected. Although the macro backdrop remains uncertain, the company expects limited impact from Middle East conflict and continues to favor the luxury watch category and its growth opportunity in the still underpenetrated US market.

Analysis framework

The report mainly compares actual revenue, constant-currency growth, and EBIT guidance with Visible Alpha consensus, Goldman Sachs estimates, and the company's prior guidance, while assessing the investment view through regional performance, category demand, margin outlook, capex, and potential macro risks. The target price is based on a DCF valuation, with Goldman Sachs Factor Profile, M&A rank, and peer coverage framework used as context.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow valuation

  The 12-month target price of 600p is based on DCF, using a 10.5% WACC and a 2.5% terminal growth rate.

• Factor analysisGS Factor Profile

  Comparative percentile analysis of growth, financial returns, valuation multiples, and overall ranking

  Goldman Sachs Factor Profile compares individual stocks with the market and peers on growth, financial returns, valuation multiples, and an overall composite metric in percentile terms to provide investment context.

• M&A frameworkM&A Rank

  Probability grading of potential acquisition targets

  Goldman Sachs ranks covered companies from 1 to 3 by their likelihood of being acquired; the chart in this report shows WOSG with an M&A rank of 3, which usually means M&A factors are not important to the target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• WOSG.L

  Covered company and core investment name

  Strengths

  4Q trading performance was stronger than guidance and consensus, both the US and UK markets posted growth, the luxury watch supply-demand backdrop remains favorable, and the FY27 margin outlook is better than the market expected.

  Weaknesses

  FY26 EBIT margin still implies a year-on-year decline, and the business is sensitive to luxury demand, core brand allocations, and macro consumer sentiment.

  Comparison

  2H26 revenue, FY26 constant-currency growth, US revenue growth, and FY26 EBIT guidance were all above Visible Alpha consensus and Goldman Sachs estimates.

  Risks

  Rolex expands its own direct retail distribution, increased competition, product allocations shifting to other regions, rising investment or M&A spending, and a luxury market and macro environment weaker than expected.

Key data

• 2H26 revenue£983mn4% above Visible Alpha consensus of £948mn and above Goldman Sachs estimate of €927mn, with constant-currency growth of 17%.
• FY26 constant-currency revenue growth+13%Above Goldman Sachs estimate of +9%, Visible Alpha consensus of +10%, and the company's guidance of +9% to +11%.
• UK 2H revenue£465mnUp 6% at constant currency, above Visible Alpha consensus of +4% and Goldman Sachs estimate of +1%.
• US 2H revenue£518mnUp 27% at constant currency, above Visible Alpha consensus of +18% and Goldman Sachs estimate of +16%, supported by watches, jewellery, Roberto Coin, and the acquisition of D&D showrooms.
• FY26 pre-IFRS16 adjusted EBIT guidance£152mn to £155mnAbove Visible Alpha consensus of £149mn.
• FY27 revenue guidanceconstant-currency growth of +5% to +10%Includes an approximately 2 percentage point impact from FY26 having one more week than FY27; Goldman Sachs estimate is +6.5%, and Visible Alpha consensus is +7.5%.
• FY27 pre-IFRS EBIT marginexpansion of 40 to 80 bpsAbove Goldman Sachs estimate of +20 bps and Visible Alpha consensus of +30 bps.
• FY27 capex guidance£60mn to £70mnBelow Goldman Sachs estimate of £81mn.
• 12-month target price600pBased on DCF; Goldman Sachs maintains a Buy rating.

Impact & implications

The update reinforces WOSG's execution capability and demand resilience in the UK and US luxury watch and jewellery retail markets, especially with US growth coming in well ahead of expectations. Higher FY26 EBIT guidance and better-than-expected FY27 margin expansion suggest earnings quality is more resilient than the market had feared. If the company continues to benefit from supply-constrained core luxury brands, waitlist products, and an attractive customer mix, its valuation re-rating still has support.

Risks

• Rolex expands its own direct retail distribution, reducing reliance on retailers such as WOSG.
• Rising industry competition.
• Product allocations shifting to other regions, such as China.
• Higher investment in new retail projects or M&A activity.
• A weaker-than-expected luxury market and external macro headwinds such as consumer confidence and tariffs.
• Macro uncertainty could affect FY27 revenue and margin delivery.

What to watch

• Comments on the US and UK trading environment during the company's 8:30am GMT call.
• Whether Middle East conflict has any spillover impact on demand or supply chains.
• Management's further explanation of margins, since the trading update mainly disclosed revenue data.
• The executability of FY27 revenue, margin, and capex guidance.
• Supply of key luxury brands, demand for waitlist products, and the pace of US market expansion.