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Watches of Switzerland Group lost a quarter of its market value on Friday after Rolex agreed to buy a leading Swiss watch retailer.
Watches of Switzerland shares
WOSG,
slumped as much as 30%, after Rolex on Thursday said it’s buying Bucherer, which has 100 outlets worldwide, not just in Switzerland but in the U.S., the U.K., Germany, France, Denmark and Austria.
Watches of Switzerland has 202 showrooms in the U.K., the U.S. and Europe, and the overlap between the two is most pronounced in the U.S., after Bucherer’s 2018 acquisition of Tourneau.
In a statement, Watches of Switzerland said the move is not a strategic move into retail by Rolex but a move reflecting Bucherer’s succession challenges, as 86-year-old Jorg Bucherer, the grandson of the founder, does not have heirs.
Watches of Switzerland said its statement was reviewed and confirmed “by the highest level of Rolex management” at both Geneva headquarters and in the U.K. and the U.S.
Analysts weren’t so sure. “The acquisition paves the way for Rolex to expand its direct-to-consumer sales efforts,” said Eleonora Dani, an analyst at Shore Capital. Rolex presently just has a single owed store, in Geneva.
Noting Rolex accounts for more than half of Watches of Switzerland’s business, HSBC downgraded its rating on Watches of Switzerland to hold from buy. “The obvious ugly scenario with Rolex now developing a distribution arm would be for the watch brand to allocate the little volumes it has as a priority to the newly acquired Bucherer even though it will unlikely communicate this short term,” said Erwan Rambourg, HSBC’s analyst. Rambourg also said that Rolex could limit the ability of Watches of Switzerland to open new locations.
In its statement, Rolex said the Bucherer deal is the best solution not only for its own brands but for the broader industry. It said Bucherer will continue to be independently run.
