Watches of Switzerland shares plunge by a quarter after Rolex buys retailer Bucherer
A collection of Rolex timepieces is displayed on a vendor's booth at the London Watch Show held in London, England on March 19, 2022.
Leon Neal, a photographer affiliated with Getty Images
On Friday morning, the value of the Watches of Switzerland Group plummeted by a quarter, marking the worst day for its stock, following the news of luxury watchmaker Rolex's acquisition of watch retailer Bucherer.
According to Rolex, they purchased Bucherer due to the choice made by Jorg Bucherer, the current owner and the great-grandchild of Carl Bucherer, to sell the company since there are no immediate family members to carry on the legacy.
Rolex stated that this decision showcases the intention of the brand based in Geneva to prolong the achievements of Bucherer and safeguard the strong alliance that has connected both organizations since 1924.
The Rolex group firmly believes that this purchase is the optimal resolution not just for their own brands, but also for all the watch and jewelry associate brands, along with every employee of the Bucherer group.
Bucherer will preserve its name and brand, and its management team will stay the same, as confirmed by Rolex. Once competition authorities give their approval, the integration of Bucherer into the Rolex business will be finalized.
In a follow-up announcement on Friday, Watches of Switzerland tried to ease apparent worries in the market that Bucherer, the biggest high-end watch seller worldwide, will gain a larger portion of the market through its collaboration with the renowned brand.
Watches of Switzerland emphasized that the purchase was only aimed at ensuring a smooth transition for Bucherer and denied any strategic intention from Rolex to enter the retail industry, as the brand typically operates solely as a manufacturer.
According to the official statement from Watches of Switzerland, it was mentioned that Jorg Bucherer does not have any family members who will take over his position. Instead, he intends to establish a foundation with the money gained from this deal in order to leave a lasting impact.
Watches of Switzerland explained that Rolex's entry into the retail space should not be seen as a deliberate strategy. Rather, it should be viewed as a well-considered response to the succession issues faced by Bucherer SA.
Rolex will not have any direct participation in the Bucherer business operations. Rolex will select individuals to join the Board who will provide input without holding executive positions. The acquisition of Bucherer will not bring about any modification in the way Rolex allocates its products or handles distribution advancements.
However, the stocks of the British company listed on the London exchange experienced a significant drop of up to 29% at the beginning of the trading session, although they later recovered some of the losses.
Reassurance Ignored
According to Russ Mould, the investment director at stockbroker AJ Bell, investors are concerned that the collaboration will result in Bucherer obtaining "special privileges, such as greater availability of the sought-after watches that consumers are longing to purchase."
Mould stated via email that Watches of Switzerland's attempts to provide reassurance to the market regarding Rolex's stock allocation have been ignored or disregarded.
This is the commitment that Rolex could have made presently, but there is a possibility of alteration in the future.
Mould observed that multiple product makers, including major sports clothing labels, had adopted a new practice of selling their items directly to customers. By doing so, they aimed to gain insights into customer preferences and increase profits by bypassing traditional retailers.
"Picture this scenario unfolding with Rolex. In theory, it could utilize Bucherer as its platform for selling its watches and bypass the hassle of dealing with other authorized retailers like Watches of Switzerland," suggested Mould.
It is important to mention that numerous mid-cap fund managers have expressed a strong preference for Watches of Switzerland shares. They will need to thoroughly analyze the recent Bucherer announcement and determine whether it significantly alters the investment opportunity.
