Watches of Switzerland, Britain’s biggest Rolex seller, is under pressure from activist investor Gatemore to abandon its main stock market listing in London and explore options in the United States.
Gatemore, which recently acquired 1.9 million shares in the London-listed company, claims Watches of Switzerland’s share price has “significantly decoupled” from its value due to misconceptions about its exposure to the luxury goods slowdown.
Gatemore believes moving the luxury retailer’s main listing to the US could lead to higher valuations, better reflecting its intrinsic value. US markets are often seen as offering more favorable conditions for luxury brands, with higher valuations compared to the London stock market.
Following this announcement, Watches of Switzerland shares rose more than 2% on Wednesday morning. Liad Medar, managing partner of Gatemore, highlighted the company’s strong fundamentals and the track record of its management team, but expressed concern about the “broader tightness in UK markets”. This trend has prompted many London-listed companies to consider moving their listings to the United States to improve market conditions.
Decline in the value of stocks and a decline in the UK stock market
The Swiss watch industry has faced major challenges this year, with its shares falling by more than a third since January. Earlier in 2023, £516m was wiped off the company’s market value after a warning of slowing demand for luxury goods, as customers reallocated spending towards fashion and travel amid the cost of living crisis.
Despite the economic downturn, Gatmore is confident that Watches of Switzerland remains well-positioned to thrive, particularly in the United States, where the luxury market remains resilient. The activist investor pointed to Swiss watch export data indicating continued strength in both the US and UK markets, suggesting that Swiss watches have not been significantly affected by the broader slowdown in spending on luxury goods.
Expansion into the American market
The Swiss watch company, which also sells fine jewelry from Cartier and high-end watches from Audemars Piguet, has been steadily increasing its presence in the United States. Gatmore believes the company is ready to unlock further growth in what it calls the “huge and underpenetrated US market.”
The call to move the listing comes at a time when concerns have been raised about the impact of the UK Government’s decision to scrap tax-free shopping for foreign visitors. This has led to concerns about a decline in tourism spending in the UK, with Brian Duffy, CEO of Watches of Switzerland, being one of the most vocal critics of the policy.
Earlier this week, Duffy joined other luxury business leaders in signing a letter to Chancellor Rachel Reeves, urging the government to re-evaluate the decision on tax-free shopping.
“We are calling for a new, objective government assessment of this important topic as a matter of urgency,” Duffy said.