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Contrary to Watches of Switzerland Group PLC (LSE:WOSG) belief, Rolex’s purchase of watch retailer Bucherer is considered a “strategic move”, according to analysts at Shore Capital.
“This acquisition is seen as a strategic move by Rolex to secure its position and strengthen its presence in the luxury watch market,” the capital markets group said.
Offering over 100 points of sale across the world, with stores in the US, the UK, France, and Germany, Bucherer’s purchase “paves the way for Rolex to expand its direct-to-consumer sales efforts.”
Watches of Switzerland, the British retailer that sells Rolex products, was quick to note that the acquisition was not strategic but instead was due to the Swiss retailer’s owner Jörg G. Bucherer’s lack of succession plans.
Shore Capital Group (LSE:SGR) added: “With Bucherer’s extensive retail network, Rolex gains the opportunity to tap into a wider consumer market and directly control a larger portion of its distribution channels.
“The move aligns with Rolex’s desire to uphold the success of Bucherer and maintain the strong partnership ties that have linked the two companies since their collaboration began in 1924.”
Antitrust
Rolex claimed the acquisition would not affect its core business and instead, Bucherer would remain an independent operation, however, Shore Capital believes the deal will still be dissected by antitrust regulators.
“The luxury watch industry is on the verge of transformation, and this acquisition marks a strategic step that has the potential to reshape Rolex’s future market presence,” analysts at the UK broker said.
In 2018, Richemont, the owner of luxury brands like Cartier, bought online retailer YNAP for around £4.6 billion in a move that echoes Rolex’s acquisition.
Four years later, Richemont sold YNAP to fellow e-commerce competitor Farfetch, taking a €2.7 billion write-down as rival brands had become apprehensive about selling on the platform, worrying the Dunhill owner would have too much access to its data.
Cartier watch Source FT
Impact
Shore Capital is not revising any Watches of Switzerland estimates just yet, as it believes there is little “geographical overlap” between the British group and Bucherer – the former focusing on the US and UK, while the latter is mainly situated in continental Europe.
Just how management at the FTSE 250 firm reacts to the deal is key for Shore Capital to fully understand the impacts, with analysts hoping to understand how it will affect strategy, long-range plans, and how it impacts the whole luxury industry.
“While we sense that the deal may not carry significant strategic weight for the UK, where Bucherer operates only 5 stores, it does raise more considerations for WOSG’s strategy in the USA, where WOSG owns 47 stores compared to Bucherer’s 30,” the capital market group added.
A good deal for Rolex? Only time will tell Source Wired UK
Refraining from jumping to any conclusion prematurely, Shore Capital noted it would be approaching Watches of Switzerland’s investment case with “caution rather than undue optimism” but warned that if the stock sees a deep drop, it could be an “attractive buying opportunity”.
Watches of Switzerland is down more than 22% on Friday, after opening just under 700p.
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