Watches of Switzerland: Rolex decision on Bucherer is awkwardly timed
The temptation to sell more through the Swiss retailer will exist
A Bavarian, Hans Wilsdorf, founded what became Rolex more than a century ago in London to distribute Swiss wrist watches. Rolex may have turned back the clock. This week it agreed to acquire Switzerland’s leading Rolex retailer, privately held Bucherer.
That news wound up shareholders of London-listed Watches of Switzerland. They fear Rolex may favour Bucherer as a stockist of one of the world’s top luxury marques. The share price fell more than a quarter on Friday to 555 pence.
One can understand the concern. The pricey timepieces are in short supply. Used Rolexes in good condition often cost more than new, which can take years to arrive. Rolex has plans to expand capacity but this will not come on stream until around 2028.
Watches of Switzerland is the top seller of Rolex worldwide. But owner Jörg Bucherer’s family too has a longstanding relationship with the foundation that owns Rolex. He has no direct descendants.
Bucherer has about 100 sales outlets throughout Europe and America. The foundation tightly controls not only which retailers can sell Rolex, but also any dealer’s number of authorised shops.
Watches of Switzerland aims to expand throughout the US and Europe. Rolex could offer more of its precious output to Bucherer, fears Peel Hunt. Only half of Bucherer shops sell Rolex and thus the temptation to sell more through the Swiss retailer will exist. This will weigh on the shares, which have already retreated from their December 2021 peak of 1470p when they traded more than 30 times forward earnings. That valuation has more than halved since.
About half of Watches of Switzerland’s sales come from Rolex, so less supply would hit growth. Analysts on Visible Alpha forecast revenues climbing more than a third by April 2026. The retailer says it had discussed with Rolex this outcome and asserts that the foundation has no plans for a direct to consumer model. Unfortunately, a retailer with no control over its main supplier is on borrowed time.