Gatemore Calls for Watches of Switzerland to Move US Listing Amid Market Concerns

Investment firm Gatemore, which recently acquired 1.9 million shares in Watches of Switzerland, has raised concerns over the luxury retailer’s stock valuation. The firm claims that the company’s share price is “significantly dislocated” from its intrinsic value, largely due to misconceptions about its exposure to a slowdown in the luxury goods market.

Gatemore advocates for the relocation of Watches of Switzerland’s primary listing from London to the United States, arguing that such a move could lead to higher valuations that better reflect the company’s actual worth. U.S. markets are perceived as offering more favorable conditions for luxury brands, often resulting in elevated valuations compared to those in London.

Following Gatemore’s announcement, shares in Watches of Switzerland saw an uptick of over 2% on Wednesday morning. Liad Meidar, Gatemore’s managing partner, underscored the company’s robust fundamentals and effective management team, while expressing concern about the “broader malaise in UK markets.” This trend has prompted several London-listed companies to explore the possibility of shifting their listings to the U.S. in search of more advantageous market conditions.

Challenges and Declining Share Value

Watches of Switzerland has encountered significant hurdles this year, with its share price plummeting by more than a third since January. Earlier in 2023, the company faced a £516 million drop in market value after issuing a warning regarding a slowdown in luxury demand, as consumers redirected spending towards fashion and travel amidst the ongoing cost-of-living crisis.

Despite these setbacks, Gatemore remains optimistic about Watches of Switzerland’s prospects, particularly in the U.S. market, which continues to show resilience in luxury spending. The activist investor pointed to recent Swiss watch export data that indicates ongoing strength in both U.S. and UK markets, suggesting that Watches of Switzerland has not been significantly affected by the overall slowdown in luxury demand.

Expansion in the U.S. Market

Watches of Switzerland, known for its offerings of luxury jewelry from Cartier and high-end watches from Audemars Piguet, has been gradually increasing its presence in the U.S. market. Gatemore believes the company is positioned to capitalize on further growth in what they describe as a “massive and underpenetrated U.S. market.”

This call for a shift in listing comes as the UK government faces criticism for its decision to eliminate tax-free shopping for overseas visitors, raising concerns about a potential decline in tourist spending in the UK. Brian Duffy, CEO of Watches of Switzerland, has been a vocal opponent of this policy. Earlier this week, he joined other luxury business leaders in signing a letter to Chancellor Rachel Reeves, urging the government to reconsider the tax-free shopping decision.

Duffy stated, “We are calling for a fresh, objective Government assessment of this important subject as a matter of urgency.” As Gatemore and Watches of Switzerland navigate these challenges, the focus remains on adapting to the evolving luxury market landscape.