Analysts split over US listing for Watches of Switzerland following activist investor campaign

London-listed Watches of Switzerland has come under pressure from activist investor Gatemore Capital Management to ditch its UK listing for the US, with analysts split over whether the decision would be beneficial for the firm.

The UK’s biggest Rolex seller, which runs 221 stores globally, listed in London in 2019 and is currently a member of the FTSE 250 index with a market cap of £1bn.

However, the Leicester-based company has struggled in recent years, with its share price on a steady decline over the last three years, falling 70 per cent since its peak in 2021.

2024 has been a tough year for the group, according to Peel Hunt analysts, as the firm’s share price has fallen by over 35 per cent after a sharp profit decline due to a slowdown in the broader luxury market.

Its stock price plummeted a whopping 37 per cent in a single day during January after it downgraded revenue guidance and reported “challenging macroeconomic conditions” in luxury retail.

Gatemore, which has previously targeted UK businesses like Elementis and DFS, has now begun pushing for the firm to move to the US, arguing that the firm should “fully unlock the value of its stock” by ditching London.

The activist investor argued that Watches of Switzerland could benefit from greater “access to deeper pools of capital” and “significantly greater liquidity” through American markets.

Gatemore has also called for the firm to launch a “substantial share buyback” due to the low price of the company’s shares.

Last month, Gatemore said that it owned 1.9 million shares in the business, or around an £8m stake, which is less than one per cent of the group’s shareholder base.

Other major shareholders in Watches of Switzerland, including JP Morgan Asset Management, declined to comment on whether they would support a move to the US.

Companies in the UK have increasingly been tempted over the Atlantic by promises of high valuations and an greater investor base, such as gambling giant Flutter, which moved its listing to the US earlier this year.

Watches of Switzerland’s business has also been increasingly moving towards the US, with American sales representing 44 per cent of its revenue in the last financial year.

Earlier this month, the company snapped up New York-based watch website Hodinkee in an attempt to push online growth.

“Potential expansion in the world’s biggest economy is likely sizeable,” said Keith Bowman, equity analyst at Interactive Investor.

“A future listing would almost certainly raise the retailer’s profile among its many institutional investors, not to mention possible future customers.”

However, other analysts were sceptical that the move would be a good idea, due to concerns about the firm’s small size.

“A move to the US isn’t enough to suddenly make American investors sit up and take notice of Watches of Switzerland, let alone be prepared to pay a higher multiple of earnings to own the shares,” said Dan Coatsworth, investment analyst at AJ Bell.

Coatsworth also noted that with successful listing switches from retailers like Ferguson and CRH had already been doing a majority of their business in the US, rather than the 44 per cent from Watches of Switzerland.

Derren Nathan, head of equity research at Hargreaves Lansdown, agreed, stating that: “When it comes to big tech floats like Arm, then perhaps there is some rationale for looking stateside, but a £1bn retail play is hardly something that’s likely to attract the big fish on Wall Street.”

Instead, Nathan said that the weak sentiment towards the luxury sector could lead to a poor reception from US investors, arguing instead that the firm should focus on rebuilding sales over investing “the huge amount of management time and advisory fees that come with an IPO”.

Watches of Switzerland has been contacted for comment.