Bucherer Acquisition Causes Watches of Switzerland Shares to Plummet by 25%

The Watches of Switzerland Group experienced a significant decline in stock value on Friday morning, marking the stock’s worst day ever, following the announcement of a deal between luxury watchmaker Rolex and watch retailer Bucherer.

Rolex revealed that the acquisition, for an undisclosed amount, was prompted by the decision of Bucherer owner Jorg Bucherer to sell the business in the absence of any direct heirs to carry on the legacy.

“This strategic move reflects the desire of the Geneva-based brand to continue the success of Bucherer and maintain the strong partnership that has connected both companies since 1924,” stated Rolex in a press release.

“The Rolex group firmly believes that this acquisition is the optimal solution not only for its own brands, but also for all partner brands in the watch and jewelry industry, as well as for all employees of the Bucherer group.”

Rolex confirmed that Bucherer will retain its name, brand, and existing management team, and the integration process will be completed once competition regulators give their approval.

In response to apparent market concerns about Bucherer, the world’s largest luxury watch retailer, gaining a greater share of the market through this partnership, Watches of Switzerland sought to reassure investors in a subsequent statement on Friday.

Watches of Switzerland clarified that the acquisition was solely driven by succession planning for Bucherer and that Rolex—departing from its usual role as a manufacturer—is not making a “strategic move” into the retail sector.

In its statement, Watches of Switzerland emphasized that Jorg Bucherer “has no family successor and intends to establish a legacy foundation with the proceeds from this transaction.”

“Rolex’s acquisition is not a strategic move into retail. It is a well-considered response to Bucherer SA’s succession challenges,” added Watches of Switzerland.

“Rolex will not be actively involved in the operations of Bucherer. Non-executive Board members will be appointed by Rolex. This acquisition will not lead to any changes in Rolex’s product allocation or distribution processes.”

However, the London-listed company’s shares plummeted by as much as 29% in early trading before recovering some of the losses.

Reassurances disregarded

Russ Mould, investment director at stockbroker AJ Bell, expressed concerns that the partnership may result in Bucherer receiving preferential treatment and improved access to highly sought-after watches.

“Watches of Switzerland’s efforts to assure the market that there will be no changes in Rolex’s stock allocation have been disregarded,” Mould stated in an email.

“Although this is Rolex’s current stance, it could potentially change in the future.”

Mould pointed out a trend among various manufacturers, including major sportswear brands, of selling directly to consumers to gain insights into customer preferences and increase margins by bypassing retailers.

“Now, picture that scenario with Rolex. In theory, it could utilize Bucherer as its sales channel and eliminate the need for other authorized dealers like Watches of Switzerland,” Mould explained.

“It’s important to note that Watches of Switzerland has been a favored stock among many mid-cap fund managers. They will need to carefully assess the impact of the Bucherer announcement and determine if it significantly alters the investment case.”