One of the top luxury watch dealers in the world says it sees a softening of sales, signaling that even new watch merchants might be facing leaner times.

Watches of Switzerland (WOSG.L) group saw its shares drop more than 5% today as the company warned supply challenges would impact sales following its fiscal Q4 earnings release.

The retailer, which is the UK’s top Rolex dealer, said it sees a “modest sales decline in Q1 FY24 [current quarter] before normalising in Q2.” The company said its full-year guidance reflects “current visibility of supply from key brands” like Rolex, Audemars Piguet, and Breitling—and it sees the more “challenging” sales environment continuing for the next six months, before improving in the back half of its fiscal year.

“Demand remains strong and continues to exceed supply, with client registration lists continuing to grow,” CEO Brian Duffy said in a statement.

Supply, at least from one big watchmaker, should be improving soon. Rolex announced just two months ago that it would be boosting production with three new production facilities planned. And earlier this month Rolex also rolled out its certified pre-owned business in the US at select Tourneau watch outlets.

Data to watch going forward: the retailer said supply is the key metric for its success. “More than half of our business is driven by supply and you can never predict the exact timing” of deliveries, Duffy said earlier in an interview with Bloomberg.

Also holding back the luxury watch market has been declining prices in the secondary market, usually a signal of leaner times ahead in the luxury watch trade.

WatchCharts.com, which publishes a widely followed luxury watch Market Index, has seen values slip 21.6% in the past year, though the index has settled recently in the past 3 months.

Nevertheless, Watches of Switzerland group says it is expanding, and will open new showrooms in the U.S. (including the American Dream Mall in New Jersey, and midtown Manhattan), and new “monobrand” boutiques for AP, Rolex, Tag Heuer, and Breitling.

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The retailer is forecasting better times ahead. The company sees FY 2024 revenue in the £1.65 – £1.70 billion range, implying growth of 8%-11% from the prior year, with adjusted EBIT margin percentage in-line with the year before.

This builds on recent success. In the most recent quarter that ended on April 30 (FY Q4), Watches of Switzerland sales climbed 22% from a year ago, with US sales up 27%.

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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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