Today 4

US resilience powers luxury watch growth as tariffs absorbed by pricing

Bottom Line Impact

US-led growth and scarcity pricing can sustain revenue momentum and expand margins despite tariffs, strengthening market position and brand equity while UK mix shifts protect downside.

Executive Summary

Watches of Switzerland reports US sales up 20 percent in constant currency, with affluent clients accepting price increases amid a 39 percent tariff on Swiss imports. Strong US demand and waitlist dynamics are offsetting tariff headwinds, supporting margin mix and store expansion while UK demand shifts toward value-focused assortments.

Actionable Insights

Immediate Actions (Next 30-90 days)
Run tariff scenarios and price architecture to protect 150 to 200 bps margin via 3 to 5 percent US ASP uplift and mix shift to higher ASP SKUs
Rationale: Price-led mitigation can offset a 39 percent tariff burden while preserving demand given low elasticity on scarce models
Role affected:CFO
Urgency level:immediate
Monetize waitlists with deposit-backed reservations and tiered client benefits to lift conversion by 10 to 15 percent
Rationale: Structured waitlist management converts intent into guaranteed sell-through and improves allocation from brands
Role affected:CMO
Urgency level:immediate
Short-term Actions (6-12 months)
Accelerate US footprint and capacity where waitlists exceed 3 months by greenlighting 2 to 3 new boutiques or shop-in-shops in 2025
Rationale: US comp strength and constrained supply support high ROI expansion and deepens brand relationships and allocations
Role affected:CEO
Urgency level:short-term
Rebalance UK assortments toward steel, three-hand, and entry-luxury price points while preserving halo pieces at 10 to 15 percent of mix
Rationale: UK consumers are pivoting to value; targeted mix protects traffic and AUR without diluting brand equity
Role affected:Chief Merchandising Officer
Urgency level:short-term

Strategic Analysis

Next 30 to 90 days: US sell-through will remain elevated into holiday, allowing 3 to 5 percent ASP uplift to largely offset tariff drag; allocation should be shifted to US doors and e-commerce; UK assortment should pivot toward steel and time-only references to protect conversion.

Over 6 to 12 months, sustained US momentum can expand gross margin by 100 to 200 bps via mix and pricing, partially neutralizing tariffs; a potential tariff reduction would unlock incremental 200 to 400 bps margin upside; UK tax changes may pressure demand, requiring tighter OTB and deeper value tiers.

Retailers with superior clienteling and brand allocation will gain share as scarcity persists; mono-brand boutiques and vertically integrated groups will compete on priority inventory and price execution; US-focused players will outgrow peers reliant on China or UK, improving bargaining power with Swiss maisons.

Suppliers are pushing through price increases to protect factory margins; authorized dealers must optimize allocation, reduce discount leakage, and accelerate pre-owned to capture trade-ins; consumers at the high end remain price insensitive for waitlisted SKUs, while mid-tier buyers in the UK shift to value.

Risks & Opportunities

Primary Risks

  • Tariffs persist or escalate, compressing margins and straining working capital
  • Brand price increases outpace consumer tolerance outside waitlisted SKUs, slowing unit velocity
  • UK tax policy dampens demand, leading to higher markdown risk on premium SKUs

Primary Opportunities

  • Tariff relief in US-Swiss negotiations expands gross margin by 200 to 400 bps
  • US store and e-commerce expansion captures share while competitors rebalance toward Asia
  • Pre-owned and trade-in programs increase inventory turns by 10 to 20 percent and widen client funnel

Market Context

US luxury remains the global growth engine amid a slower China recovery and cautious Europe; scarcity-driven demand in watches continues to favor brands and retailers with allocation access and data-led clienteling. Gen-Z and younger HENRYs are trading up selectively, while sustainability tailwinds support certified pre-owned growth. Competitive pressure from mono-brand boutiques and vertically integrated players is intensifying, making omnichannel client ownership and post-purchase services a key differentiator.

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