The record results are built on a single, powerful foundation: exceptionally strong demand in the United States consistently outpacing supply. This imbalance is the core driver behind the company's financial performance and its favorable pricing environment.
The momentum is clear and sustained. Last year, the US business grew 16% at constant currency to reach $1 billion in revenue for the first time. That strength accelerated into the current fiscal year, with the first half showing sales up 20% in constant currency. This isn't a one-off surge but a multi-period trend, with group revenue in the second half of last year jumping 12% at constant currency. The financial dominance of this market is now absolute. As CEO Brian Duffy noted, the region now makes up almost 60% of our profitability.
This profitability is directly tied to the fundamental supply-demand dynamic. The company repeatedly cites that demand for its key brands outstripped supply in both the US and UK markets. This persistent gap creates a seller's market. When demand consistently exceeds what brands can deliver, retailers like Watches of Switzerland gain pricing power. This is a classic supply-constrained environment where the company can maintain or even raise prices without losing customers, directly supporting margins.
The evidence points to this imbalance being particularly acute for top-tier brands. The success of the Rolex Certified Pre-Owned program, which has become the Group's second-largest brand equivalent, is a direct response to this scarcity. When new watches are hard to get, the pre-owned market thrives. The company's own investments in showrooms and digital offerings are aimed at capturing this insatiable demand, further solidifying its position as the primary channel for these sought-after timepieces. In essence, the US growth engine is fueled by a relentless demand that the supply chain has yet to fully match.
The Collector Profile: Who's Driving the Surge
The surge in US demand is not a monolithic wave but a complex current shaped by distinct collector profiles. Understanding these groups reveals why the supply-demand imbalance persists and may even deepen. The most visible force is a new generation redefining the market's very foundations.
Gen Z is rapidly redefining the luxury watch industry, prioritizing individuality and storytelling over traditional status symbols. This generation's buying habits are reshaping demand, with a notable renewed appreciation for dress watches. Their preference for slim profiles, leather straps, and vintage designs aligns with a desire to stand out, creating a new channel of demand that may diversify the market away from the most hyped sports watches. This shift is polarized: younger buyers often gravitate toward entry-level luxury or high-end statement pieces, with less interest in mid-tier pricing. This behavior suggests a market where demand is becoming more selective, potentially amplifying scarcity for both accessible and ultra-rare pieces.
Yet, amid this generational shift, one brand remains a constant anchor: Rolex. It is the most requested brand across all ages, a testament to its enduring appeal and the persistent scarcity that fuels its desirability. This universal demand acts as a baseline, ensuring that even as new categories like dress watches gain traction, the core pressure on supply remains intense for the most sought-after models. The company's own success with its Rolex Certified Pre-Owned program is a direct commercial response to this anchor demand, proving that when new watches are hard to get, the pre-owned market thrives.
Perhaps the most telling signal of collector commitment is the resilience of gold watch demand. Despite a spike in precious metal prices, demand for designs made from these materials remains strong. This indicates powerful pricing power and a deep-seated collector ethos. Buyers are willing to pay a premium for the intrinsic value and cachet of gold, treating these pieces as long-term holdings rather than short-term commodities. It's a clear sign that the fundamental drivers of demand-scarcity, heritage, and personal expression-outweigh the volatility of raw material costs.
Together, these trends paint a picture of a market where the supply-demand imbalance is being sustained by evolving but still powerful collector habits. Gen Z is expanding the definition of what a luxury watch can be, while Rolex anchors demand in timeless scarcity. And the continued strength in gold watches shows that for committed buyers, the price of admission is not a barrier. For a retailer like Watches of Switzerland, this creates a multi-faceted, resilient demand base that is difficult for brands to fully satisfy, ensuring the favorable conditions for pricing power and profitability endure.
Financial Impact and Margin Resilience
The powerful US growth story has translated directly into strong underlying profitability, demonstrating resilience even amid significant cost pressures. Last year, the group's adjusted EBITDA grew 8% to £192 million and adjusted earnings before tax rose 11% to £150 million. This performance is particularly notable given the "exceptional costs" that weighed on the headline numbers, including a fall in operating profit of 5% and a 18% drop in statutory profit before tax. The adjusted figures show the core business is generating robust cash flow and profit, a direct benefit of the favorable supply-demand environment.
Management's confidence in this underlying strength is clear in its actions. The company has reiterated its full-year FY26 guidance, citing "improved market trends" and a "resilient luxury watch segment." This reaffirmation, made after a strong first half where group revenue rose 10% at constant currency, signals that the momentum is expected to continue. The guidance itself is a practical measure of that resilience, with the company projecting constant-currency revenue growth between 6% and 10% for the year.
A key headwind has been currency volatility, specifically the strength of the Swiss franc. In 2025, this added cost pressure, but the company's pricing power helped offset it. The situation was complicated by US tariffs on Swiss goods, which initially stood at 39% before being reduced to 15%. In response, some brand partners implemented mid-single-digit price increases in the US market. This ability to pass on costs to consumers is a hallmark of a seller's market where demand consistently outstrips supply.
The bottom line is that the favorable supply-demand dynamic is acting as a powerful margin buffer. While external factors like currency and tariffs create friction, the persistent gap between demand for key brands and available supply gives Watches of Switzerland the pricing power to protect its profitability. The strong adjusted earnings growth and the reaffirmed outlook show that the company is not just riding a sales wave but is building a financially resilient business on top of it.
Market Context and Future Catalysts
The company's aggressive US expansion is playing out against a backdrop of robust, if uneven, market growth. The global luxury watch sector is projected to expand at a 6.14% CAGR through 2030, with the US segment alone expected to reach $19.14 billion by 2032. This sets a favorable stage for a retailer with a dominant US position. Watches of Switzerland's strategy of showroom expansions and targeted acquisitions is a direct play on this growth, particularly in the jewelry segment where the acquisition of Roberto Coin was a key driver behind a 108% surge in jewelry revenue last year. This move not only diversifies the product mix but also deepens the company's footprint in the high-margin luxury goods space.
The future pressure point, however, is the very scarcity that fuels current success. As collector habits reveal, engagement is high but nuanced. A study of collectors shows many rotate through their collections, indicating sustained interest and active use of their purchases. This behavior supports a healthy secondary market, where the company's own Rolex Certified Pre-Owned program has become a major revenue stream. The insight here is that rotating collections create a natural churn, feeding demand for both new and pre-owned pieces. For Watches of Switzerland, this suggests a dual opportunity: to capture new demand at retail while also expanding its pre-owned platform to service the existing collector base.
The company's path forward hinges on executing its growth strategy while navigating the constraints of brand supply. Its focus on large-format showrooms and acquisitions is designed to build scale and capture a larger share of the growing US market. Yet, the persistent gap between demand for key brands and available supply remains the central dynamic. If brand partners cannot increase output to meet this demand, the company's pricing power and profitability will likely remain protected. The risk is that as the market grows, so too does competition for limited inventory, potentially squeezing margins if the supply-demand balance shifts. For now, the company is well-positioned to ride the growth wave, but its long-term advantage depends on its ability to manage this delicate balance between capturing market share and leveraging its unique access to scarce goods.