- Rolex’s Acquisition of Bucherer Raises Concerns
- Impact on Watches of Switzerland Group
- Rolex’s Assurances and Market Reaction
Following the announcement that Rolex had acquired luxury retailer Bucherer, Watches of Switzerland Group shares plummeted Friday.
Investors were concerned that Rolex was planning a long-term transition away from relying on authorized partners for retail sales in favor of selling directly to affluent consumers following the announcement of the acquisition.
Such a transaction could have a significant impact on Watches of Switzerland’s business, but the London-based company insisted that Rolex’s ‘processes for product allocation or distribution developments’ would not be affected.
Bucherer is a watch and jewelry retailer with more than 100 locations worldwide, including seven in prominent UK shopping destinations such as Oxford Street’s Selfridges and Covent Garden’s Royal Opera House.
Ernst Bucherer, son of company founder Carl Friedrich, reached an agreement with Rolex co-founder Hans Wilsdorf for the company to become a significant retail partner for the watchmaker almost a century ago.
In addition to retailing Rolex and Tudor watches, the Lausanne-based company offers a service center and watch repair workshops.
Jorg G. Bucherer, nephew of Ernst and grandson of Carl Friedrich, has decided to sell the company for an undisclosed amount to establish a charitable foundation, according to Rolex.
It added that the acquisition was “the best solution not only for its brands but also for all the watch and jewelry partner brands, as well as for all the Bucherer Group employees.”
According to Watches of Switzerland, Rolex executives have verified they are not making a strategic move into retail’ and will have no ‘operational involvement’ in the Bucherer business.
Nevertheless, despite this reassurance, Watches of Switzerland Group shares fell 20%, or 140p, to 553.5p just before 3 pm on Friday.
Russ Mould, investment director at AJ Bell, stated, ‘There has been a trend among numerous product manufacturers, including the major shoe companies, to sell directly to the consumer.
‘By doing so, they gain a deeper understanding of consumer preferences and increase their profit margin by eliminating the middleman in these direct sales.
Imagine if that were to occur with Rolex. Theoretically, it could use Bucherer as its sales channel and not engage with other authorized dealers like Watches of Switzerland.
The Bucherer acquisition was announced approximately two weeks after Watches of Switzerland reported a minor decline in summer sales due to a weaker performance in the United Kingdom, where the timing of product deliveries negatively impacted trade.
Brian Duffy, chief executive officer, has also cited the elimination of VAT-free shopping as a factor in the flight of international visitors from Britain to other major European cities.
