Watches of Switzerland Group PLC ($WOSG)

Good morning, and welcome to the Watches of Switzerland Group's FY '26 Trading Update Webcast. We are joined this morning by Brian Duffy, Chief Executive Officer; and Anders Romberg, Chief Financial Officer. [Operator Instructions] I'll now hand over to the Watches of Switzerland Group management team, Brian Duffy. Please proceed.

Thank you, Dom, and good morning, everyone. Thanks for joining our full year fiscal '26 trading update call. A few introductory comments from me, and then we'll open the line for your questions for myself and Anders. Our group sales coming in at plus 13% in constant currency, plus 11% in reported, a total of GBP 1.83 billion, well ahead of the high point of our guidance and our market consensus. H2 growth trends were marginally better than H1 despite being up against tougher comps. We expect adjusted EBITDA of between GBP 152 million and GBP 155 million, also ahead of expectations. Our team delivered great results navigating through challenges, including changing import tariffs, gold price inflation, some other challenges. They really did a great job. Sales in the U.S. of GBP 1.24 billion, were 24% up on prior year, and the U.S. is now more than 50% of group sales. This is a major milestone for our group achieved in just 8 years since we entered that market. The U.S. luxury watch market is the largest and fastest-growing major market globally, and we continue to see the market as underdeveloped. The high-income segment in the U.S. has benefited from significant increases in wealth due mainly to the appreciation of financial assets and the luxury watch market in the U.S. is buoyant. The U.S. luxury jewelry market is also the #1 market globally, and our Roberto Coin wholesale business has shown great sales progress of plus 22% in USD for the year. Roberto Coin brand performed very well in our Mayors stores in Florida and the 3 new mono brands and new website all performing in line with our expectations. Our acquisition of the Deutsch & Deutsch 4 stores in Texas has proceeded well, and the business is performing well, too. In the U.K., sales have improved in H2, and we continue to view the U.K. luxury market as stable. Sales for the year were plus 5%, and we had a particularly stronger year for luxury jewelry. Looking ahead to fiscal year '27, we're carrying in strong momentum and good confidence into the year. Our guidance is for sales growth of between 5% and 10% in constant currency. That is, of course, 52 weeks on prior year of 53. If we adjust for that, the guidance we're giving is between 7% and 12%. And we're getting to a profitability improvement of between 40 and 80 bps compared to fiscal year '26. Our growth pillars are all performing well, and we have a strong pipeline of projects. In the U.K. and U.S., we look forward to another year of record growth. Many thanks to our wonderful colleagues for showing, again, their commitment and enthusiasm, excellent client service and delivering these strong results for fiscal year '26. So with that, we'll open the line for your questions.

[Operator Instructions] We'll take our first question from Chris Huang from UBS.

It's Chris Huang from UBS. And first of all, congratulations on the results. I have 2 questions. The first one maybe on the U.K. I mean, the momentum of the U.K. market seems to be turning as you did 7% in H2 for the region. Could you perhaps help us understand better the regional expectations you baked in for the FY '27 guidance? I'm asking because your comps get quite easy in H1. So would it be fair to assume maybe some further acceleration in the U.K. even into the double-digit range in H1? Secondly, on the U.S., we saw in H2 another very impressive half year. So I'm just wondering here if you could help us understand the underlying drivers of the growth of this 27% in H2. How much was driven by new stores and how much by the uplift in average selling price and volumes within the existing stores, please?

Thanks, Chris. U.K. market is good, and we characterize it. It's stabilized in fiscal '25, which we reported. We continue to see it as stable. We have picked up a bit of momentum. We have areas in which we are performing very well. Our Bond Street Rolex flagship store is doing extremely well, very proud of the performance and particularly the feedback from clients on that store, which really couldn't be better. So that's a great success. Our e-com business in the U.S. and the U.K. is doing very well, and we had a real standout performance in jewelry. And it's honestly, it's just a lot of the good things that we're doing across our network. We have the year 2, year 3 of major expansions that we've done in prior years, seeing the benefit of them coming through. We don't split our guidance by market. So we can't tell you what our assumption was for the U.K. other than to say that we're carrying good momentum in. We see the market is stable. We see it as continuing to be so for the year. There's obviously disruption around politically or whatever. But honestly, we see the circumstances that we're in today is better than they've been in the last couple of years with the amount of instability that's been overall. U.S. market is, on the other hand, very strong for reasons that I said, the underdevelopment of the category, the watch category in particular and very kind of positive frame of mind of the high-income consumer combining to create good market conditions. Again, we carry into the year experiencing -- the new year experiencing those conditions. We're up against tougher comps, of course. And we project forward the business based upon what we're experiencing. But obviously, the comps that we're up against are going to be that bit tougher. So our advice would be not to -- this is our best call for the market as the guidance that we're giving. We wouldn't get carried away beyond that at this point. There's obviously things going on in the world that can still affect the climate that we're doing business in. But the ASP and pricing, we can get back to you on the average price for the year.

I mean most of the pricing action that we saw as a result of the tariffs impacted this last fiscal year FY '26 predominantly. There has been a few price adjustments due to the gold price, and that's the part of the segment in watches that has been somewhat impacted, but it's not been the materiality that we saw in last fiscal year.

Yes. And we never anticipate price increases, you know that and they generally happen at the start of the calendar year, not always, but they generally happen at the start of the calendar year, but we never assume it in our numbers.

Our next question comes from Richard Taylor from Barclays. We move to the next question from Adrien Duverger from Goldman Sachs.

I just wanted to thank you, Caroline, for the work we've done together over the last few years and good luck in your next endeavor. I have a couple of questions, if possible. The first one is, if you could please comment on the momentum ex waitlisted products, both in the U.K. and in the U.S. And my second question would be with regards to the preowned category. So relative to your midterm target, how is Rolex CPO progressing? Are you now selling Rolex CPO in all of your stores, both in the U.K. and in the U.S.? And do you still -- is it still the second biggest brand in the group nowadays?

Thanks for your questions. The situation with regards to the mix of our business on the supply constrained sector of our business has been very steady. Again, with the demand in the U.S., we could be selling everything to waitlist clients for those brands. In case of the U.K., as we've reported, we have an element of a walk-in business and an element of stock that's available. Again, that seems to be steady. It's a very good experience around, obviously, for our salespeople and clients, at least to have some access to products. So a big part of our business is highly predictable because it is based upon supply and it's based upon the list that we have. We continue to add to the list U.K. and U.S. When new products come along following Watch and Wonders, we get another wave of additions to the listing, and that happened, of course, this year with the new products that were announced in Geneva. So it remains very steady and a core part of our model and mix. Preowned is going very well. It's at least in line with what we would have expected it to be, maybe even a little bit better. In the case of the U.S., we're in all of the doors for Rolex CPO in the U.K. We have a few more doors still to add that we'll do in this fiscal year. It's really just going to matter of when are we reorganizing or relaying out the store, and we obviously coincide the development with that. So we have a few doors to add yet in the U.K. It's a core part of our business. Sorry?

D&D...

Yes. And the other thing I'd emphasize we have Rolex Certified Pre-Owned business is going very well and the other brand preowned business is also going very well. So as a category, it is our #2 brand, if you like, from that standpoint and a great business for us. We are learning more and more as we go, developing more and more relationships and obviously developing a great awareness with our clients who are coming to take the experience some really interesting product that we can now present. It's been a particular success in Bond Street. Again, where we have -- if you've been there, we have a beautiful presentation of very interesting products to see and understand quite apart from shopping. We have clients coming to us asking to source vintage product and so on. So -- it's really great space for us. Our new acquisition in Texas, Deutsch & Deutsch will be bringing certified preowned to them as well as some other elements of the business that we can add. So it's really a good category, and it's contributed well to our growth over the last couple of years, including fiscal '26.

And to add to that, the team is getting better and better at procurement and stock management. So the health of our inventory has never been as good as it is today.

And the market, as I'm sure you track is very stable as well from a pricing standpoint following that crazy volatility over '22 and '23.

[Operator Instructions] We are now taking our next question from Kate Calvert from Investec.

I just got a question on Roberto Coin. I was wondering if you could update and give a bit more detail on the 4 mono store trials, how they're going and performing and sort of expectations for the year ahead? And also perhaps update on progress with discussions getting more space in some of your wholesale partners?

Thanks, Kate. The whole Roberto Coin business with us, I'm very, very pleased with the integrations, the collaboration that we have with the teams in Italy with Roberto himself and his family and the team under Peter Webster in the U.S. that we are obviously getting to know. The 4 mono brands, there's 3 at the moment with our forthcoming in Tampa, all going well. The website as well as Roberto Coin DTC going very well. What's going extraordinarily well is the expansion of Roberto Coin within the Mayors Group, where we have installed shop-in-shops and clearly the training and really focused on the merchandising and so on. And we're using -- to your last point, we're using these experiences, these projects to clearly then take them out and present to our other wholesale partners. And we've more than doubled the business in the Mayors stores from what we've done. And it's become a very important brand and even comparing well to and exceeding actually the productivity of some major brands in the stores. So it's great, but I'm off to Vegas. And in a couple of weeks, the biggest event of the year is the Couture JCK event takes place in Wynn where we happen to have our stores. We have a lot of meetings set up with big department store partners and our big independent retailers. We have a program of expansions that we're working on. Obviously, they all take time to negotiate to get the space to procure the furniture and everything else. So we're on it and delighted with the results that we got last year, delighted with the fact that we continue to do well despite the fact that we had to put prices up, obviously, since it's predominantly gold, the product. And it's going to be an important part of our business and obviously makes a disproportionate contribution from a profit standpoint since we have both the wholesale and retail margin when we do this direct-to-consumer business and the stand-alone wholesale business is nicely profitable as well. You know that the business that we acquired was a 20% EBIT business. So yes, very, very positive about Roberto.

We are now moving to our next question from Richard Taylor from Barclays.

Hopefully, you can hear me this time. I've got a question on the margin guidance. I know you have the Roberto Coin debtor that was talked about in the Q3 statement. So just keen to understand how much of the 40 to 80 bps uplift you're talking to is an underlying improvement versus some of that unwind.

Well, we never really disclosed the absolute number for Roberto Coin. But obviously, the write-off that we had to take as part of the Chapter 11 proceedings, which now is closed, by the way. We don't expect that to annualize next year, obviously. So that has a slight impact. So you can make up your own number, but I think it's out there. So I know most analysts have put in around GBP 3 million to GBP 4 million for that. So that's a benefit that we'll have next year. The rest of the margin expansion is coming from operational leverage, which is historically how we've driven the profitability in this business over more than a decade actually. So it's coming from that, the margin expansion, and we expect that to contribute to the 60 bps, which is the midpoint.

And we've worked on our brand mix. It is a great thing that we have -- we're a multi-brand, we're a true multi-brand retailer in the main, and we're able to change the mix of our product as we go, and we've had some really great success and we've kind of reorganized the mix of our brands in terms of productivity and the margin impact. We continue to look at our store portfolio as well. So yes, a few things contributing to the improvement that we are guiding to.

We are now taking our next question from Piral Dadhania from RBC.

Congratulations on a great -- I had 2 quick questions, please. The first one relates to the 2027 guidance, the 5% to 10% revenue growth ambition. Could you help us understand how we should think about the price versus volume split? And then the second question relates to potential U.S. tariff refunds. Is there any benefit accruing to watches of Switzerland from that? Or is there any way in which you could leverage your supplier partners to help you with CapEx or OpEx contributions against any potential windfall coming from that side?

I'll take the second one first. The tariffs obviously are paid by the brands importing the product, not paid directly by us in terms of our watch brand partners. To your point, it takes the pressure off that was there from them in terms of pricing and margin. And of course, as we discuss projects with them and plans and so on with them, we're well aware that the tariff situation is much more favorable to what it was at one point in fiscal '26 and what we may have feared going forward. This specific for us is the importation of the Roberto Coin product and of course, we've made our applications and working on that as we speak. But we don't pay the watch tariffs directly.

In terms of pricing, obviously, we've seen less aggressive pricing coming through from the brands this year than what we saw last year, where brands were making up for the cost of the tariffs and the price of gold that was skyrocketing. So in our guidance, there is a component of pricing that is rolling forward. So for instance, a brand like Cartier took the pricing up in September of last year by 10% in the U.S. Obviously, that benefits us in the first half of this fiscal year. We always incorporate pricing that we know of. We do not include any pricing that hasn't been announced by the brands. So to answer your question, it's going to be a mix of price and volume that's going to drive our growth in the next fiscal year.

That's all we have from our conference audience. I'd like to turn the conference back to the management team for any additional or closing remarks. Please go ahead, sir.

Thank you. Do we have some further questions that have come in online?

We have no webcast questions at the moment. Back for closing remarks.

Okay. Listen, thanks again for joining the call, everybody. And a particular thanks to our team for managing our way through what has really been a bit of a volatile year that we really feel is settled down through the year and carries a more stable perspective in fiscal '27 that we're now in. The teams have done an absolutely amazing job, but obviously very well positioned. We are now more than 50% U.S. business. That is the best market to be in right now, long may it continue. But we're confidently get into a year that we think is a lot more predictable than we might have experienced over the last few. And I appreciate your support and interest in our business.