On your Apple Watch, open the Settings app
Tap General
Tap Reset
Tap Erase All Content and Settings
Enter your passcode if prompted
If using cellular, choose whether to keep or remove your cellular plan
Confirm the reset
Wait for the Apple Watch to erase and restart
To reset using your iPhone, open the Watch app
Tap My Watch
Tap General
Tap Reset
Tap Erase Apple Watch Content and Settings
Confirm the reset
If needed, unpair the Apple Watch from your iPhone to remove Activation Lock