Watches of Switzerland allays concerns as Rolex buys competitor Bucherer

It came after the luxury watchmaker announced it was acquiring luxury watch and jewellery retailer Bucherer on Thursday, contingent on the approval of Swiss competition authorities.

Bucherer has been an authorised Rolex dealer since 1924, and has also owned the US-based retailer Tourneau since 2018.

Rolex said it was acquiring Bucherer as its owner, Jorg Bucherer, is 86 years old and has no family succession.

“This is not a strategic move into retail by Rolex,” Watches of Switzerland said in its statement.

“This is the best-judged reaction to the succession challenges of Bucherer.

“There will be no operational involvement by Rolex in the Bucherer business.”

The company said Rolex would appoint non-executive board members, and claimed there would be no change in Rolex's processes of product allocation or distribution developments as a result of the acquisition.

“All of the above is reviewed and confirmed by the highest level of Rolex management at Rolex HQ in Geneva, and locally in the UK and US,” the company said.

Victoria Scholar, head of investment at Interactive Investor, noted that shares were plunging on Friday, down over 26% for their biggest one-day drop on record and hitting December 2020 lows.

“The tie-up between Burcherer and Rolex could solidify its ties at the expense of Watches of Switzerland, potentially diminishing its relevance in the market for sales of second-hand Rolex watches,” Scholar noted.

“Rolex is a highly popular brand with demand sharply outweighing supply.

“High end customers and the luxury market have proven to be highly resilient to the broader macroeconomic and cost-of-living pressures this year.”

Scholar did, however, note that earlier in the month Watches of Switzerland maintained its full-year guidance, saying demand for luxury watches remained robust.

Russ Mould, investment director at AJ Bell, meanwhile said investors seemed to fear the tie-up between Rolex and Bucherer would mean Bucherer received preferential treatment, including better access to the watches that consumers were desperate to buy.

“Watches of Switzerland’s efforts to reassure the market that there will be no change in how Rolex allocates stock have fallen on deaf ears.

“This is what Rolex might have promised now, but that could easily change in the future.”

Mould noted that there had been a trend among various product manufacturers, including the big trainer companies, to sell directly to consumers.

“In doing so, they learn more about customer preferences and make more margin as they can cut out the middleman for these direct sales.

“Imagine that happening with Rolex - theoretically, it could use Bucherer as its channel to sell and not have to bother with other authorised dealers such as Watches of Switzerland.

“It’s worth noting that Watches of Switzerland has been a favourite stock among many mid-cap fund managers.”

They, Mould said, would have to look hard at the Bucherer announcement, and decide if it radically changed the investment case.

At 1001 BST, shares in Watches of Switzerland were off earlier lows, down 23.7% at 529.12p.

Reporting by Josh White for Sharecast.com.