**Watches of Switzerland Faces Profit Margin Pressure from US Tariffs**
Watches of Switzerland Group Plc is bracing for a decline in its profit margin this year due to US import tariffs, as luxury watchmakers increase prices and resellers absorb some of the financial impact in this crucial market. The UK-based luxury watch retailer anticipates that its margin on earnings before interest and taxes could decrease by as much as 100 basis points compared to the previous year. This forecast is based on the assumption that the US will maintain a 10% tariff following President Donald Trump’s July 9 deadline for new trade agreements.
In early trading in London, shares of Watches of Switzerland dropped by as much as 10%, marking the steepest decline since early April when Trump announced his controversial ‘Liberation Day’ tariffs, although some of the losses were later recovered. The watch industry has been significantly affected by ongoing trade tensions and uncertainty surrounding tariffs, prompting manufacturers to expedite shipments to the US earlier this year to mitigate the risks associated with a potential trade war. This disruption has compounded a broader slowdown in luxury demand in China.
As the largest Rolex reseller in the UK, Watches of Switzerland reported that its brand partners in the US have raised prices by mid-single digits while also reducing the margin percentage for distributors. The retailer had previously cautioned in May that the announcement of US tariffs was contributing to consumer uncertainty. Last year, the company generated 47.6% of its sales from the US, surpassing $1 billion in revenue for the first time. However, it also reported an 18% decline in pretax profit for the same period. Looking ahead, Watches of Switzerland projects revenue growth of between 6% and 10% this year in constant currency terms.
**Conclusion**
The impact of US tariffs on Watches of Switzerland highlights the challenges faced by luxury retailers in a volatile trade environment. As the company navigates these pressures, its ability to adapt to changing market conditions will be crucial for maintaining profitability and growth.
**FAQ**
**What impact will US tariffs have on Watches of Switzerland’s profit margins?**
Watches of Switzerland expects its profit margins to decline by up to 100 basis points this year due to increased prices from watchmakers and the absorption of costs by resellers in response to US tariffs.
