The shares of Watches of Switzerland experienced a significant drop of over 27% this morning after news broke that Rolex had acquired the prominent jeweler, Bucherer AG.
Attempting to allay investor concerns about potential negative impacts on the company's sales, the luxury watch retailer, which offers Rolex timepieces, addressed the situation this morning.
In an effort to mitigate concerns, the company stated, "There will be no change in the Rolex processes of product allocation or distribution developments as a consequence of this acquisition."
Rolex surprised the industry by announcing its acquisition of Bucherer, one of the world's largest watch retailers, yesterday. However, the deal seems to have sparked apprehensions among investors regarding preferential treatment for Bucherer over Watches of Switzerland.
Russ Mould, investment director at AJ Bell, remarked, "Investors appear to be anxious that the collaboration might result in Bucherer receiving preferential treatment, including better access to highly sought-after watches. Watches of Switzerland's efforts to reassure the market about Rolex's stock allocation processes have not been well received. While Rolex may make assurances now, these could easily change in the future."
Mould added, "It's important to note that Watches of Switzerland has been a favored stock for many mid-cap fund managers. They will need to carefully evaluate the implications of the Bucherer announcement and determine whether it fundamentally alters the investment outlook."
Despite the prevailing cost-of-living crisis, Watches of Switzerland and the broader luxury market have maintained relatively strong performance. The group reported a slight decline in revenue for the 13-week period ending on July 30, registering £382 million—down 2.3% from the same period the previous year.
Nevertheless, the company noted robust demand for watches and maintained its full-year guidance, projecting annual revenue ranging between £1.65 billion and £1.7 billion. Photo by hh oldman, Wikimedia commons.