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Watches of Switzerland, Britain’s biggest Rolex seller, is under pressure from activist investor Gatemore to abandon its main London listing and explore options in the US.
Gatemore, which recently acquired 1.9 million shares in the London-listed company, claims Watches of Switzerland’s share price has been “significantly dislocated” from its value due to misconceptions about its exposure to the luxury goods slowdown.
Gatemore believes that moving the luxury retailer’s main listing to the US could result in higher valuations that better reflect its intrinsic value. It is often assumed that US markets offer more favorable conditions for luxury brands, with higher valuations compared to the London stock market.
Following the announcement, shares in Watches of Switzerland rose more than 2% on Wednesday morning. Gatemore’s managing partner, Liad Meidar, highlighted the firm’s strong fundamentals and the track record of its management team, but expressed concern about the “broader malaise in the UK markets.” This trend has led several London-listed companies to consider moving their listings to the US for better market conditions.
Watches of Switzerland has faced significant challenges this year, with shares down more than a third since January. Earlier in 2023, £516 million was wiped off the company’s market value after a warning of a slowdown in demand for luxury goods, as customers shifted their spending to fashion and travel amid the cost of living crisis.
Despite the recession, Gatemore is confident that Watches of Switzerland remains well positioned to thrive, especially in the US where the luxury market remains resilient. The activist investor pointed to Swiss watch export data showing continued strength in both the US and UK markets, suggesting Watches of Switzerland has not been significantly affected by the broader slowdown in luxury spending.
Expansion into the American market
Watches of Switzerland, which also sells luxury jewelry from Cartier and high-end watches from Audemars Piguet, has steadily expanded its presence in the US. Gatemore believes the company is poised to achieve further growth in what she calls the “vast and under-penetrated US market.”
The call to move the listing comes as 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 Britain, with Brian Duffy, CEO of Watches of Switzerland, 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 reconsider the decision on tax-free shopping.
Duffy said: “We urgently call for a new, objective assessment by the government on this important issue.”