Investing.com -- The Watches of Switzerland Group (LON:WOSG) is poised to benefit from recent adjustments in retail prices by Rolex, its primary supplier, as per analysts at Barclays (LON:BARC).
Rolex implemented price increases across its steel and gold watch models, marking an average rise of about 5% in both the UK and US markets.
Steel models saw modest price hikes of about 1%, while gold models saw a more prominent increase ranging between 7% and 8%.
These adjustments come as no surprise in the UK, where such changes have been customary at the start of the year. However, this marks a notable shift in the US market, where no price increases were observed at the same time last year.
Rolex watches account for around half of Watches of Switzerland’s revenue, with the UK and US markets collectively contributing a similar proportion to the company’s overall income.
The price increases are expected to bolster the company’s financial performance during the remaining months of its fiscal year ending April 2025.
Barclays analysts view the development positively, particularly as Watches of Switzerland’s financial guidance for the year does not factor in price increases beyond those already announced. The revisions will also benefit stock purchased prior to the end of 2024.
While the primary market outlook is optimistic, analysts highlight a contrasting trend in the secondary market for Rolex watches.
Over the past 24 months, resale values have declined by about 12%, with a 5% drop noted in the last year alone. Despite this, the retail segment remains strong, and analysts believe the price hikes are unlikely to deter demand significantly.
Barclays maintains an "overweight" rating on Watches of Switzerland, with a price target of 590 pence per share, reflecting a 5.5% upside from the stock’s year-end 2024 closing price of 560 pence.