Watches of Switzerland shares plunge on Rolex-Bucherer deal, despite reassurances

Watches of Switzerland Group (WOSG) saw many millions wiped off its market value on Friday over concerns that Rolex might grab a chunk of its business following its first move into retail via the purchase of Bucherer.

WOSG has seen a succession of hugely successful years as affluent consumers continue to visit its stores to buy watches and jewellery. Its relationship with luxury brands is a strong one and it operates a raft of monobrand stores for them as well as its own multibrand locations.

It’s the third-largest seller of Rolex watches, but analysts have speculated about its future relationship with that business after the acquisition of Bucherer means Rolex now operates a retailer for the first time.

The shares fell as much as 30% initially on Friday, reducing WOSG’s market value by almost half a billion pounds. However, they eased back and were down ‘only’ 23% in later morning trading.

So why were analysts worried? Well, Rolex accounts for half of WOSG sales and given the share price plunge, the company went so far as to issue a statement on Friday to soothe concerns. It explained the logic behind the deal and stressed that it shouldn’t affect its own business.

The company said: “Bucherer is a long-standing retail partner of Rolex, one of the largest globally (alongside The Watches of Switzerland Group) and the major retailer in the important Swiss market. Mr Jorg G Bucherer is 86 years old and is the grandson of the founder Carl F Bucherer. The co-operation and partnership between Hans Wilsdorf, the founder of Rolex and Carl F Bucherer is chronicled in the official Rolex history (from 1924).

“Mr Bucherer has no family succession and his wishes are to form a legacy foundation with the proceeds of this transaction.

“This is not a strategic move into retail by Rolex. This is the best-judged reaction to the succession challenges of Bucherer SA. There will be no operational involvement by Rolex in the Bucherer business. Rolex will appoint non-executive board members. There will be no change in the Rolex processes of product allocation or distribution developments as a consequence of this acquisition.

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

Yet analysts still had concerns with suggestions that the move could be a “cloud” over the firm for a while. 

The fact that WOSG had this month reported a slower performance in Q1 could also have influenced the reaction. The company had said the quarter’s “robust” demand for luxury watches exceeded supply in the UK and Europe (which represents 88% of revenue) and that this suppressed sales numbers there. It was also up against tough year-ago comparisons. And while the US was strong, overall sales dipped 2% for the period.