Shares of Watches of Switzerland Group Plc slipped more than 3% on Friday after Jefferies downgraded the luxury watch retailer from "buy" to "hold." The broker simultaneously raised its price target to 740 pence from 440 pence, but said the scope for further valuation expansion has diminished.
Valuation framework and rationale
Jefferies said its decision reflects a reduced runway for multiple expansion - noting a current calendar 2027 price-to-earnings ratio of 13.1x compared with the post-COVID historic range of 7x to 14x. The firm moved to a sum-of-the-parts valuation approach, replacing its earlier group calendar 2026 P/E-based target (10.3x) with a roll-over to 2027 earnings and a higher aggregate multiple of 13.1x.
Under the new split, Jefferies applies a c.10x 2027 earnings multiple to the UK business and a c.16x multiple to the U.S. business, a split the broker said captures the contrast between a mature UK market and a higher-potential, but more equity-sensitive, U.S. exposure.
U.S. performance: re-acceleration but mixed signals
Jefferies described the company’s U.S. turnaround as "impressive" in recent periods, but qualified that the outlook is unclear. On a fiscal year 2025/26 basis, the broker cites U.S. ex-FX growth of 22.7% before the 53rd week, underpinned by about 20% growth at Coin and a 2.4% contribution from the four-month consolidation of D&D.
Consensus expectations that U.S. ex-FX growth will be about 14% in fiscal 2026/27 and 8.5% in fiscal 2027/28 are judged by Jefferies to be fair rather than conservative, compared with Jefferies’ own forecasts of 14.5% and 8% for those years.
The broker also noted that it has begun lapping the elevated U.S. price increases implemented by major brands since Liberation Day, recording cumulative monitored hikes of 12.6% across Patek Philippe, Rolex, Cartier and Omega. Jefferies added that pricing support has started to ease since September 2025, pointing to a high-single-digit price reduction from Patek Philippe in February.
UK exposure and domestic demand considerations
On the UK front, Jefferies said that despite industry lobbying there is no evidence supporting a return of duty-free shopping, and that recent political developments make such an outcome unlikely within the current Parliament. The brokerage therefore frames the group as exposed to a mixed domestic demand backdrop, with the UK set to account for roughly 45% of group revenue by fiscal 2027/28 and thus more susceptible to consumer pressure.
Financial forecasts retained in refreshed view
Jefferies’ refreshed forecasts project group revenue of £1.80 billion for fiscal 2025/26, £1.97 billion for fiscal 2026/27 and £2.10 billion for fiscal 2027/28, up from £1.65 billion in fiscal 2024/25. The broker’s earnings per share projections are 43.0 pence, 53.6 pence and 58.3 pence for the same three fiscal years, respectively, versus 41.6 pence in fiscal 2024/25.
What Jefferies expects from company results
Jefferies said the group’s upcoming final results, due July 14, should confirm the near-term buoyancy of North American demand. Nonetheless, the brokerage emphasised reducing valuation attractions and the tapering of inflation-related tailwinds as central reasons for its downgrade.
Corporate-level risks highlighted
In its note, Jefferies lists several risks to its price target and outlook: lower product volumes supplied by brands; intensifying competition for acquisitions; the potential imposition of new U.S. tariffs; and a shift in consumer preferences away from the hard luxury segment.
With a valuation mix that now explicitly separates UK maturity from U.S. potential, the brokerage has signalled a more nuanced view of Watches of Switzerland’s growth profile - rewarding U.S. momentum while flagging the constraints that weigh on multiple expansion overall.
This article summarises Jefferies’ published research note and the immediate market reaction; it does not add or infer facts beyond the broker’s statements and the company forecasts cited above.