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Shares in the Watches of Switzerland Group slumped this morning after Rolex bought one of its key rivals, Bucherer.
The British retail group – which includes Goldsmiths, Mappin and Webb and Mayors in the United States – saw its share price fall around 28 per cent at one point as investors reacted to Rolex’s acquisition of the Swiss jeweller and watch manufacturer.
Bucherer has stores around the world including in Switzerland, Germany, France, Austria, Denmark and the US.
It has four locations in London – at One Hyde Park in Knightsbridge, Selfridges in Oxford Street, the Royal Opera House in Covent Garden, and the Village at Westfield London.
Only last month shares in Leicester-based Watches of Switzerland jumped 13 per cent on the back of news that profits were up almost a quarter as it continued its expansion across Europe and the States.
However, since then it said a drop in demand for luxury jewellery had combined with slower UK and European sales to push its global revenues down. It is the UK’s biggest retailer if Rolex watches – as well as OMEGA, Cartier, TAG Heuer and Breitling.
Today management tried to play down the news saying Bucherer was a long-standing retail partner of Rolex.
It said Rolex had confirmed the acquisition was part of plans by 86-year-old Jorg G Bucherer – owner and third generation of the Bucherer family – to secure the future of the business in light of the fact that he has no family succession.
It said it was not a strategic move into retail by Rolex and there would be no operational involvement by Rolex in the Bucherer business. It also said there would be no change in the way Rolex allocated or distributed merchandise.
Rolex, it said, had confirmed each of those points.
Russ Mould, investment director at online broker AJ Bell, said that, nevertheless, Watches of Switzerland investors appeared to be rattled at Rolex’s expansion into retail.
He said: “Investors seem to fear the tie-up will mean Bucherer gets preferential treatment including better access to the watches that consumers are 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.
“There has been a trend among various product manufacturers including the big trainer companies to sell direct to the consumer.
“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 will have to look hard at the Bucherer announcement and decide if it radically changes the investment case.”
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