Openwork: Inside the Watch Industry

Episode 67: V-Shaped Recovery? – The Watch Industry Shows Early Signs of a Turn-around

Date: February 9, 2026
Hosts: Gabe Reilly & Asher Rapkin, Collective Horology

Episode Overview

In this episode, Gabe and Asher analyze the early signs of a recovery in the global watch industry following several tumultuous quarters marked by tariffs, currency challenges, and changing market dynamics. Their discussion spans recent financial results from major players like Watches of Switzerland (WoS) and Swatch Group, the consolidation of authorized dealers in the U.S., the impact of pricing and currency fluctuations, and notable product launches—capped off with a spirited debate over Audemars Piguet’s bold new direction. The tone throughout remains candid, insightful, and deeply connected to real-time industry dynamics.

Key Discussion Points & Insights

1. Market Bellwethers: Watches of Switzerland's Growth and U.S. Expansion

[03:41-11:16]

• WoS as an Industry Indicator: With operations in the US, UK, and Europe, WoS's performance now serves as a critical measure of the luxury watch landscape.
• Aggressive U.S. Presence: "They're buying businesses that already exist in the United States. So you could argue the opposite, which is to say this is a foreign company, it's a British company that is, you know, buying American businesses and taking them over." (A, 07:17)
• Strategic Acquisitions: Recent purchase of Texas-based Deutsch & Deutsch bolsters WoS’s U.S. footprint, especially in Rolex-driven, secondary Texas markets.
• Industry Consolidation: The big three corporate ADs—WoS, Bucherer, and the 1916 Company—have rapidly reshaped the U.S. dealer landscape.

Notable quote:
"...it's pretty clear that it's the 1916 company, it's Bucherer and it's Watches of Switzerland and that that tier of, of corporate dealers, those are the ones that are going to duke it out here in the United States." (B, 10:13)

2. Implications for Independents: Are Family-Owned Retailers Under Duress?

[11:46-16:20]

• Wave of Sales: Increasing numbers of multi-generational, family-owned dealerships (especially Rolex ADs) are selling to conglomerates.
• Selling Under Pressure?: "Are they doing it under duress? ...You've got these juggernauts... dominating and growing aggressively... Are they seeing the writing on the wall?" (A, 12:07)
• Complex Motives: While strategic, the trend is bittersweet—owners may be driven by both business calculus and shifting market power.
• Brand Approval: Key luxury brands require approval before dealer sales change hands, ensuring close brand control.

Memorable insight:
"...if you're a retailer who relies very heavily on one particular brand, you're always going to have that massive liability." (B, 15:57)

3. WoS’s U.S. Strategy: Millennial Focus, E-Commerce, and Regional Nuance

[17:27-21:22]

• America as Growth Engine: WoS views the U.S. as "still a relatively unsaturated and untapped opportunity," in contrast to Europe’s dense retail environment.
• Millennial Targeting: Significant investments in e-commerce channels and partnerships (like Hodinkee) aim to attract younger, digitally native clientele.
• Leveraging Regionality: Acquisitions like Deutsch & Deutsch aren’t just about stores—they’re about "generational knowledge and credibility" in unique markets like Texas (B, 19:46).

Notable quote:
"You’re not just buying those doors ...You’re also buying generational knowledge and credibility in places that might not be as excited or interested to shop with Watches of Switzerland ..." (B, 19:46)

4. Swiss Export Data & Tariff Relief: Signs of Recovery

[22:55-27:13]

• Swiss Exports Surge: December exports to the U.S. rose ~20% YoY, revealing pent-up demand as tariffs were reduced.
• Currency Headwinds: The weak U.S. dollar vs. Swiss franc (now ~$1.29) and surging gold prices (+80% YoY) continue pushing up costs.
• Tariffs Aren't Everything: Non-tariff factors (FX, commodities) mean "pressures are just continue to mount" for both brands and consumers.

Memorable exchange:
"Gosh, the volatility here is wild... It's risen about 10%, nearly 20 points, in the last year." (A, 26:44)

5. Watch Brand Pricing Behavior: Patek’s Surprise & Margin Squeeze

[24:39-36:33]

• Patek Price Cuts: Patek Philippe unexpectedly lowered U.S. prices—counterintuitive amid ongoing cost pressures.
• Market Implications: Unpredictable pricing creates volatility, undermining consumer confidence and complicating dealer strategy.
• Dealer Margins Squeezed: Across the board, from conglomerates to independents, higher costs and stiffer terms are crimping profitability.

Notable exchange:
"Do you think dealer margins are now permanently squeezed?" (A, 38:55)
"No... if you're an independent retailer ...what you have is flexibility and credibility." (B, 39:00)

6. The Swatch Group: Thin Profits & Shareholder Activism

[44:01-51:47]

• Thin Margins: Swatch Group reported only $25M in profit on $6.3B revenue—a razor-thin 0.4% net margin.
• Activist Investor Pressure: Minority shareholders, frustrated by a dual-class share structure that gives the Hayek family outsize voting power, are pushing for reforms (similar to Richemont's more equitable governance).
• Industry Context: Compared to Richemont’s 22% margin, Swatch’s result is “pretty stark”—inviting further scrutiny and potential upheaval.

Notable business reality:
"Relative to that, break even... it's break even. The net margin is 0.4%. Less than a percent." (A, 45:40)

7. Audemars Piguet’s New Direction: The Neo-Frame Jump Hour

[51:47-67:19]

• Product Innovation: AP debuted the Neo-Frame—an Art Deco-inspired, rectangular jump hour watch (approx. $70K), expanding beyond the Royal Oak and Code 11.59 lines.
• Strategic Gamble: AP hopes to attract new clientele outside its core demographic, especially women and collectors weary of the perennial Royal Oak hunt.
• Risk of Gatekeeping: Concerns emerged about whether this watch might simply become another “bundle” item required to access more desirable pieces.

Notable quote:
"I think APs in general are too expensive at the entry level. There is some incredible watch on the high end... if they want a different kind of customer, do they expect that customer to then conform to them or will they conform to that customer? Let's find out." (B, 66:49)

Notable Quotes by Timestamp

• "They're buying businesses that already exist in the United States...this is a foreign company...buying American businesses." (A, 07:17)
• "It's pretty clear ...those are the ones that are going to duke it out here in the United States." (B, 10:13)
• "Are they doing it under duress?...these really are these families' not just livelihoods but identities." (A, 12:07)
• "...if you're a retailer who relies very heavily on one particular brand, you're always going to have that massive liability." (B, 15:57)
• "You’re not just buying those doors ...You’re also buying generational knowledge and credibility..." (B, 19:46)
• "Gosh, the volatility here is wild... It's risen about 10%, nearly 20 points, in the last year." (A, 26:44)
• "Relative to that, break even... it's break even. The net margin is 0.4%. Less than a percent." (A, 45:40)
• "What this does do ... is open up an additional road and path in front of a client at AP..." (B, 60:04)
• "If they want a different kind of customer, do they expect that customer to conform to them or will they conform to that customer? Let's find out." (B, 66:49)

Timestamps for Important Segments

• 03:41 — Watches of Switzerland’s role as an industry bellwether
• 07:17 — The impact of WoS’s U.S. acquisitions
• 11:46 — Consolidation and the independent retailer dilemma
• 17:27 — WoS’s U.S. market strategy and millennial focus
• 22:55 — Swiss exports spike and currency impact
• 24:39 — Surprise pricing moves by Patek Philippe
• 38:55 — Permanent squeeze on dealer margins?
• 44:01 — Swatch Group earnings and activist investor movement
• 51:47 — Audemars Piguet’s Neo-Frame jump hour launch and business implications

Episode Tone and Style

As always, Gabe and Asher deliver a candid, slightly irreverent, and deeply informed perspective. Their commentary blends industry-insider knowledge with questions and metaphors relatable to both seasoned collectors and everyday listeners. The hosts are unafraid to challenge conventional narratives—whether on tariffs, business models, or branding maneuvers—while always rooting their conclusions in real-world data and first-hand retail experience.

Summary Takeaway

The luxury watch industry is showing signs of a "V-shaped" recovery, but that recovery is intricate and uneven. Growing corporate consolidation, volatile macroeconomics, margin compression, and bold new product strategies are reshaping the competitive field. Dealers, consumers, and brands alike face unresolved pressures—but also new opportunities—as the next stage of the watch world unfolds.