Watches of Switzerland Group PLC (LSE:WOSG) shares have benefited from a recent luxury rerating ahead of its half-year results next month that are expected to be solid, though UBS is still concerned by persistent tariff uncertainty and an evolving competitive backdrop.
In a note ahead of the H1 trading update on 6 November from the luxury watches and jewellery retailer, UBS forecast sales of £839 million, representing 9% growth if excluding currency swings.
UK revenue is projected to rise by 6%, in line with the prior period, while US sales are expected to climb 13% due in part to earlier stock building efforts.
UBS estimates an EBIT margin of 8.5% for the period, improving by 10 basis points year-on-year, with most of the margin pressure from new US tariffs expected to emerge in the second half of the year.
Analysts highlighted that visibility remains low on the full impact of tariffs, particularly after changes introduced in August, while there is also uncertainty around key brand decisions, such as those from Rolex, which continue to weigh on valuation prospects.
“We remain on the sidelines as we wait for a cleaner catalyst path ahead and for incremental reassurance regarding the evolving competitive landscape in luxury watches post Rolex-Bucherer deal to unlock the valuation multiple," the UBS analysts said, staying with their 'neutral' rating.
While keeping the rating unchanged, UBS increased its price target to 415p from 400p, citing small upgrades to earnings estimates and a higher sector multiple.
Investors will be watching for updates on US tariff impacts, brand performance, market conditions, and integration of the recently acquired Roberto Coin business in the US, analysts said.