Watches of Switzerland Group: On the road in NY and Texas. US upside the key to drive MT growth. Reiterate OW, price target to 825p

Research evidence excerpt

Watches of Switzerland Group: On the road in NY and Texas. US upside the key to drive MT growth. Reiterate OW, price target to 825p

y. The 12% equity stake

retained by the D&D brothers (with an option for WoS to acquire this) should help lower

execution risk, and retain local presence of the previous owners, who are well known to many

customers.

Takeaway 3). Hodinkee acquisition cements position as market leader, and offers some

incremental revenue potential especially in e-commerce. Whilst we do not see material

upside to revenue and profit from the Hodinkee acquisition vs Roberto Coin or incremental

M&A, we believe that it 1) helps cement WOSG's profile as a market leader in the US, given the

significant number of YouTube subscribers / views of well-regarded content, and 2) can help

drive incremental revenue via insurance, licensing deals, and e-commerce revenues, given

exclusive product launches along with a link to WOSG's e-commerce operations via Hodinkee.

What if the US grows at 15-20% CAGR, and the UK 3%? US could be 65% of revenue in

FY30E, EPS could be 95% higher than FY26E: In light of the US performance that has been

evident from recent results, and our analysis of potential US upside described elsewhere in this

report, we have revisited the 2023 "Long Range Plan" to map out the potential MT earnings

power of the business. We believe that the UK growth CAGR from the previous LRP

(8-10% CAGR) looks optimistic, so we instead assume a UK revenue CAGR from FY27E of 3%. We

assume a US revenue CAGR of 20% from FY27E (lower end of the 20-25% in the previous LRP),

but acknowledge that this would require significant M&A. This would imply FY30E group

revenue of £2.9bn, close to the >£3bn of revenue by FY28E under the previous LRP, but delivered

c2 years later.