Watches of Switzerland, Britain’s largest Rolex seller, is under pressure from activist investor Gatemore to abandon its main stock market listing in London and explore options in the US.
Gatemore, which recently acquired 1.9 million shares in the London-listed company, claims that Watches of Switzerland’s share price is “significantly dislocated” from its value due to misconceptions about its exposure to the luxury goods slowdown.
Gatemore believes that moving the luxury retailer’s primary listing to the US could result in higher valuations, better reflecting its intrinsic value. US markets are often seen as offering more favourable conditions for luxury brands, with higher valuations compared to London’s stock market.
Following the announcement, shares in Watches of Switzerland rose by over 2% on Wednesday morning. Gatemore’s managing partner, Liad Meidar, highlighted the company’s strong fundamentals and its management team’s track record, but expressed concern about the “broader malaise in UK markets.” This trend has led several London-listed companies to consider shifting their listings to the US for better market conditions.
Decline in share value and the UK stock market downturn
Watches of Switzerland has faced significant challenges this year, with shares down by more than a third since January. Earlier in 2023, £516 million was wiped off the company’s market value after a warning about a slowdown in luxury demand, as customers reallocated spending towards fashion and travel amid the cost-of-living crisis.
Despite the downturn, Gatemore is confident that Watches of Switzerland remains well-positioned to thrive, particularly in the US, 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 Watches of Switzerland has not been significantly impacted by the broader slowdown in luxury spending.
Expanding in the US market
Watches of Switzerland, which also sells luxury jewellery by Cartier and high-end watches from Audemars Piguet, has been steadily growing its presence in the US. Gatemore believes the company is poised to unlock further growth in what it calls the “massive 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 eliminate tax-free shopping for overseas visitors. This has led to concerns about a drop in tourist 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, Mr Duffy joined other luxury business leaders in signing a letter to Chancellor Rachel Reeves, urging the government to reassess the decision on tax-free shopping.
Duffy stated, “We are calling for a fresh, objective Government assessment of this important subject as a matter of urgency.”
