The largest retailer of Rolex watches in the United Kingdom lost nearly a third of its value on Friday after the Swiss brand acquired Bucherer AG, making its first major retailing move.
Watches of Switzerland Group Plc shares fell as much as 30%, wiping out a market capitalization of nearly £500 million ($629 million).
Late Thursday, Rolex announced the unexpected acquisition of Bucherer, prompting analysts to wonder what the deal means for Watches of Switzerland’s future relationship with the brand.
Jonathan Pritchard of Peel Hunt observed that Rolex accounts for fifty percent of the company’s sales and lowered his rating on the stock from buy to hold.
Watches of Switzerland Chief Executive Officer Brian Duffy stated in an interview that Rolex executives assured the UK’s largest retailer of the brand that it will continue to receive watches through the same distribution system.
“Nothing has changed as far as Rolex is concerned,” he said.
The purchase was “an elegant solution” to succession challenges at family-owned Bucherer, Duffy said. The retailer was founded in 1888 by Carl F. Bucherer, who desired to maintain Swiss ownership.
“Rolex will not have operational involvement in the Bucherer business,” Watches of Switzerland said in a statement.
Market Skepticism Persists
Analysts were still skeptical. “Inevitably, the market is debating today the extent to which the news signals a growing risk of a weakening future relevance of Watches of Switzerland to a key supplier for the group,” Jefferies’ James Grzinic wrote in a note.
Peel Hunt’s Pritchard said the concerns “are likely to act as a cloud over the shares for the foreseeable future.”
The stock had already come under pressure this year amid worries over softening sales and slowing demand for high-end timepieces.
Source: Yahoo! Finance