25th Aug 2023 10:36
(Alliance News) - Despite Watches of Switzerland Group PLC on Friday reassuring the market that the acquisition by Rolex SA of Swiss watch retailer Bucherer SA will not change its relationship with the key supplier, the stock lost 23% in early morning trade in London.
"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," Russ Mould, investment director at AJ Bell explained.
Rolex on Thursday announced it will buy Bucherer to "preserve the close partnership ties that have linked both companies since 1924". Rolex noted that Jorg Bucherer, in the absence of direct descendants, had decided to sell the company.
Jorg Bucherer, 86 years old, is the grandson of founder Carl Bucherer, who had formed a partnership with Hans Wilsdorf, founder of Rolex.
The Bucherer chain has more than 100 sales outlets worldwide, of which 53 distribute the Rolex brand. Rolex said Bucherer will keep its name and continue to operate independently. Integration of Bucherer into Rolex awaits competition approval.
Watches of Switzerland on Friday said the acquisition doesn't represent a strategic move into retail by Rolex, and there will be no change in the product allocation or distribution of Rolex watches.
Watches of Switzerland said it had this "confirmed by the highest level of Rolex management" in Geneva.
Analysts at Shore Capital said that while the news marked a "significant shift" in the luxury watch market, it is not revising its estimates at this stage as it believes that the deal is "unlikely" to impact Watches of Switzerland's sales of Rolex in the short term.
"There is limited geographical overlap between Bucherer and WOSG's physical presence, with the majority of Bucherer stores situated in Continental Europe, while WOSG's stores are primarily located in the UK and the US," Shore explained.
Shore said it can envisage a scenario where Rolex directs its attention to Continental Europe, where the majority of Bucherer's stores are situated, while Watches of Switzerland persists in its international expansion, particularly in the US and the Nordics.
"While this prompts us to approach WOSG's investment case with caution rather than undue optimism, we are refraining from jumping to premature conclusions," the broker concluded.
Shore added it would be "keenly observing" the market's response to the news on Friday, saying if there were to be a "substantial drop in value" there may be an "attractive buying opportunity" for the stock.
By Heather Rydings, Alliance News senior economics reporter
Comments and questions to [email protected]
Copyright 2023 Alliance News Ltd. All Rights Reserved.
Related Shares:
Watches Switz