A tough luxury market is changing the earnings outlook for Watches of Switzerland Group PLC (LSE:WOSG), though analysts at RBC still see an upside in the Rolex merchant’s share price.
The FTSE 250-listed company is positioned to make revenues at hit the lower end of the company's guidance range between £1.53 billion and £1.55 billion, RBC reckons.
This estimate is influenced by a slight downturn in US market trends for non-supply constrained luxury watches.
Earnings before interest and tax (EBIT) is estimated at £147 million, representing a 9.6% margin.
“Recent data points suggest further moderation in luxury watch demand,” said RBC analysts, who noted that Swiss watch exports have moderated to -5% in the UK and have stayed flat in the US, “which we believe reflects inventory overhang from December, cautious retailer ordering and conservative supplier stance regarding selling into a slowing market”.
RBC adjusted its price target for WOS to 425p from 475p, though this still implied an overweight rating on the stock given the 344.8p publication price.
Results are due on 16 May.