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FTSE 250-listed Watches of Switzerland plummeted on Friday on news that timepiece manufacturer Rolex is to enter the retail market.
At 510.5p per share, the luxury watch retailer was 26% lower in end-of-week business.
On Thursday afternoon Rolex announced it will buy fellow Swiss company Bucherer, a major vendor of its high-priced products. The 135-year-old retailer owns 36 stores across the UK, Germany, France, Austria, Denmark and its main market of Switzerland.
The Bucherer deal marks Rolex’s first foray into the retail market. The business also sells a wide range of other luxury brands including Omega, Breitling and Cartier, as well as its own-branded jewellery items.
Business As Usual?
On Friday, Watches of Switzerland tried to assuage investor fears by advising that the Bucherer transaction “is not a strategic move into retail by Rolex.”
It a statement to the market, it said “there will be no operational involvement by Rolex in the Bucherer business” and that product allocation and distribution methods will remain unchanged following the takeover. Rolex will appoint non-executive board members to the retailer’s board.
Watches of Switzerland said that these details were confirmed “by the highest level of Rolex management at Rolex HQ in Geneve and locally in the UK and US.”
The British firm described the deal as “the best-judged reaction to the succession challenges of Bucherer.” It noted that 86-year-old owner Jorg G Bucherer has no family succession plans in place.
A Recent Success Story
Recent rapid expansion means that Watches of Switzerland had 193 stores in its portfolio as of April. 143 of these were located in the UK and Mainland Europe, with the remainder installed in the US.
Sales have rocketed 238% (at constant currencies) in the past five years and hit record peaks of £1.54 billion in the 12 months to April.
The retailer makes almost 90% of income through the sale of luxury watches, with Rolex being one of its key suppliers. One of the FTSE 250 firm’s new flagship projects is its Old Bond Street Rolex boutique in London, which is due to open next summer.