Watches of Switzerland, Britain’s largest Rolex seller, is being advised to move its primary stock listing to the US.
- Investor Gatemore sees London’s market as less favorable for luxury brands, affecting Watches of Switzerland’s valuation.
- Shares in Watches of Switzerland rose by over 2% following the announcement.
- US market conditions are considered more favorable, with higher valuations for luxury brands.
- The UK government’s policy on tax-free shopping for tourists is causing concern among luxury retailers.
The investment firm Gatemore has recently acquired 1.9 million shares in Watches of Switzerland, a leading luxury retailer in the UK. The firm argues that Watches of Switzerland’s current stock valuation does not accurately reflect its intrinsic value, largely due to perceptions about the broader slowdown in the luxury goods market. Gatemore suggests that a primary listing in the US could help better reflect its value by benefitting from the more favorable valuations typically offered by US markets for luxury brands.
Following the announcement regarding a potential move to the US market, Watches of Switzerland experienced a significant boost in its share price, increasing by over 2% on Wednesday morning. Gatemore’s managing partner, Liad Meidar, emphasized the strong fundamentals and reputable management of the company. However, he also highlighted concerns regarding the unfavorable conditions currently prevailing in the UK market. This trend has encouraged several London-listed companies to contemplate a shift to US markets, seeking improved market conditions and valuations.
Watches of Switzerland has faced considerable challenges throughout the year, with its shares decreasing by more than a third since January. This decline includes a significant reduction in market value, with £516 million wiped off due to warnings about a potential slowdown in luxury demand. Despite this, Gatemore remains optimistic about the company’s future, particularly in the US. The activist investor notes that Swiss watch export data reflects ongoing strength in both the US and UK markets, suggesting the company is well-positioned to weather the slowdown in luxury spending.
The company sells a wide array of luxury watches and jewelry, including brands like Cartier and Audemars Piguet, and has been expanding its reach in the US market. Gatemore believes there is substantial growth potential in the US, describing it as a ‘massive and underpenetrated market’ for Watches of Switzerland. The proposal to shift the primary listing comes at a time when the UK government’s decision to discontinue tax-free shopping for overseas visitors is prompting concern regarding the potential decline in tourist spending.
Brian Duffy, CEO of Watches of Switzerland, has expressed significant concern over the UK government’s recent policy changes, especially the removal of tax-free shopping for international visitors. He has been actively involved in lobbying efforts to review this decision, joining other luxury brand leaders in urging the government to reconsider. Duffy stated, “We are calling for a fresh, objective Government assessment of this important subject as a matter of urgency.”
The push for a US listing underscores concerns about the UK market’s viability for luxury brands.
