Shares of Watches of Switzerland Group (WOSG) took a significant hit in value after the announcement of Rolex’s acquisition of Bucherer, causing concern among investors. WOSG has long been regarded as a top destination for affluent individuals in search of luxury watches and jewelry, and has cultivated strong relationships with luxury brands. Aside from operating its own multi-brand stores, the company also manages mono-brand stores for various luxury labels. Despite currently being the third-largest seller of Rolex watches, analysts are expressing doubts about the future of WOSG’s relationship with the brand following Rolex’s foray into the retail sector through the Bucherer purchase.

Initially, WOSG shares plummeted by as much as 30%, resulting in a staggering half-billion-pound decrease in market value. However, they did manage to partially recover and were down by 23% during morning trading. The main cause for concern among analysts is that Rolex accounts for half of WOSG’s sales. Attempting to assuage fears, WOSG released a statement explaining the rationale behind the acquisition and attempting to dispel the notion that this move signaled Rolex’s strategic entry into retail. The company emphasized Bucherer’s longstanding partnership with Rolex and clarified that the luxury watchmaker would only appoint non-executive board members for Bucherer, with no involvement in operations. The distribution processes and product allocation would also remain unchanged.

Despite these efforts by WOSG to address concerns, analysts are still apprehensive about the impact of the acquisition, believing it might cast a shadow over the company for a significant period. Adding to these concerns is WOSG’s recent report of slower Q1 performance, potentially influencing the market’s reaction. The company attributes this dip to high demand for luxury watches outpacing supply in the UK and Europe, where 88% of their revenue is generated. Moreover, the company faced challenging year-over-year comparisons. While the US market performed well, overall sales decreased by 2% during the period.

This development raises questions about the future dynamics between WOSG and Rolex. As both companies navigate this new landscape, it is crucial for WOSG to reinforce its unique value proposition and adapt to potential changes in the luxury retail market. Only time will reveal the true impact of this deal on WOSG’s position within the industry.

Useful Links:
1. Forbes – Luxury Retailer Watches of Switzerland Revitalizing Growth Plans
2. Reuters – Watches of Switzerland stock watch: what investors should know