Barclays outlines 3 scenarios for Swiss exports after 39% tariffs hit

Barclays has outlined the potential financial implications for Watches Of Switzerland Group (WOSG) following the imposition of new 39% U.S. tariffs on Swiss watch exports. The bank models three brand response scenarios, projecting WOSG's EPS downside risks ranging from flat to a severe 19% decline, contingent on pricing strategies and demand elasticity. Consequently, Barclays has lowered its WOSG price target from 555p to 425p, citing heightened tariff risk and revising its FY26 P/E multiple from 13x to 10x, noting the stock's current valuation already discounts some of these headwinds.

Analysis

The imposition of a 39% U.S. tariff on Swiss watch exports has created significant uncertainty for Watches Of Switzerland Group PLC (WOSG), as analyzed by Barclays. The firm has modeled three potential scenarios based on the response of major watch brands, with widely divergent outcomes for WOSG's earnings. The most severe scenario, involving U.S. price hikes and volume declines of up to 30%, could trigger an earnings per share (EPS) downside of 6-19%. Conversely, a more managed global price increase of around 2% to absorb the tariff costs presents a minimal EPS risk of 0-4% and could even lead to a share re-rating. In response to this heightened risk profile, Barclays has cut its price target for WOSG to 425p from 555p, primarily by lowering its target FY26 price-to-earnings (P/E) multiple to 10x from 13x. The stock currently trades at an 8.2x FY26 P/E, a valuation below its long-term average, suggesting that the market has already priced in a degree of concern regarding these tariff headwinds.

Key Decisions for Investors

• Investors must recognize that WOSG's earnings outlook and share price are now highly contingent on the forthcoming pricing strategies of major Swiss watch brands in response to the new U.S. tariff.
• The wide divergence in Barclays' modeled outcomes, which project fair values ranging from 166p (50% downside) to 596p (82% upside), underscores the significant event-driven risk and volatility investors should be prepared for.
• Given the stock's current FY26 P/E of 8.2x is already depressed, a key consideration is whether this discount adequately compensates for the risk of the most severe scenarios, which could reduce EPS by up to 19% and lead to a further de-rating.