(Bloomberg) — The UK’s biggest seller of Rolex watches lost nearly a third of its value on Friday after the Swiss brand bought Bucherer AG, taking its first major step into retailing.
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Watches of Switzerland Group Plc shares fell as much as 30%, wiping out almost £500 million ($629 million) in market capitalization.
Rolex unveiled the surprise move to buy Bucherer late Thursday, prompting analysts to question what the deal means for Watches of Switzerland’s future relationship with the brand. Peel Hunt’s Jonathan Pritchard noted that Rolex accounts for half of the company’s sales, and cut his rating on the stock to hold from buy.
Rolex executives assured the UK’s biggest retailer of the brand that it will continue to be allocated watches by the same distribution system, Watches of Switzerland Chief Executive Officer Brian Duffy said in an interview.
“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 by Carl F Bucherer in 1888 and wanted to remain Swiss-owned.
“Rolex will not have operational involvement in the Bucherer business,” Watches of Switzerland said in a statement.
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.
(Updates with Watches of Switzerland CEO comments)
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Source: finance.yahoo.com