Watches of Switzerland warns of profit margin decline amid tariff threats

In recent months, Watches of Switzerland, a luxury retailer known for selling high-end watches, has faced challenges primarily due to proposed U.S. tariffs on European imports. Following President Donald Trump's announcement of a 10% tariff, the retailer warned that its brand partners had already implemented mid-single digit price increases across their product ranges. Despite achieving record sales of $1.65 billion in the year ending April 27 and surpassing $1 billion in U.S. revenue for the first time, concerns around potential tariffs have overshadowed overall performance. The company noted that tariffs might affect not only pricing but also the authorized distribution networks, leading to a pessimistic review of margins moving forward. The forthcoming deadline for tariff negotiations adds uncertainty to the situation, as Trump has threatened higher tariffs if discussions fail, causing stocks to dip significantly since the announcement. Many stakeholders are observing the unfolding situation closely, understanding that further price hikes will impact consumer behavior in the luxury segment, where Watches of Switzerland plays a significant role. Brian Duffy, the CEO, expressed confidence in the company's long-term strategy despite immediate challenges, emphasizing growth plans and showroom openings as key components for future success. U.S. demand has seen a robust uptick post-pandemic, contrasted by a sluggish market in the UK, suggesting that the U.S. operations may hold significant promise if tariff issues can be resolved promptly. The broader luxury market is also experiencing shifts, with brands reconsidering marketing and distribution strategies in light of these economic pressures, implying a need for adaptation in business models to sustain growth. Stakeholders and analysts will be monitoring Watches of Switzerland’s response steps closely, as any financial adjustments could indicate larger trends within the industry as a whole.