Rolex Buys Bucherer, Leading to Stock Decline for Watches of Switzerland Group

The Watches of Switzerland Group experienced a significant drop in stock value, marking its worst day in history, as luxury watchmaker Rolex announced its acquisition of watch retailer Bucherer.

According to Rolex, the purchase was prompted by the decision of Bucherer owner Jorg Bucherer, the 86-year-old grandson of founder Carl Bucherer, to sell the business due to the absence of direct descendants to take over.

Rolex stated that the acquisition aims to uphold the success of Bucherer and maintain the close partnership that has existed between the two companies since 1924.

Rolex confirmed that Bucherer will retain its name, brand, and management team, and the integration with Rolex will be finalized once competition regulators approve the takeover.

Watches of Switzerland Clarifies Acquisition’s Purpose

Watches of Switzerland responded to market concerns regarding Bucherer’s potential increased market share resulting from the partnership.

The company emphasized that the acquisition primarily serves as a succession planning strategy for Bucherer and that Rolex is not making a strategic move into the retail market.

Watches of Switzerland assured that Rolex will have no operational involvement in Bucherer’s business, appointing only non-executive Board members. There will be no alterations to Rolex’s product allocation or distribution processes due to this acquisition.

Investors Remain Skeptical Despite Reassurances

Despite Watches of Switzerland’s attempts to reassure the market, investors fear that Bucherer may receive preferential treatment, including better access to highly sought-after watches.

Russ Mould, investment director at stockbroker AJ Bell, expressed concerns over the possibility of Rolex selling directly to consumers through Bucherer, potentially bypassing authorized dealers like Watches of Switzerland.

Mould highlighted the trend of product manufacturers cutting out retailers to gain insights into customer preferences and increase margins, questioning if this acquisition could lead Rolex down a similar path.

Given the impact of the Bucherer announcement, mid-cap fund managers who favored Watches of Switzerland as a stock will need to reassess their investment strategies.