The Rolex-Bucherer Deal: A Ticking Time Bomb for Retailers

Rolex’s recent acquisition of Swiss store chain Bucherer has set off a wave of concern for luxury retailer Watches of Switzerland (WoS). As shares in the London-listed company plummeted, investors worry that Rolex’s move could signal a shift towards direct-to-consumer selling, potentially disrupting WoS’s business model.

While Rolex asserts that Bucherer will remain independent, market skepticism persists. The stock market appears to view Bucherer as a possible gateway for replica Rolex to enter direct sales, leading to a significant drop in WoS shares, which rely heavily on Rolex products for over 50% of their sales.

For Rolex, exploring retailing makes strategic sense. Depending on third-party retailers compromises brand control and exposes the luxury watchmaker to increased promotional and discount pressures. However, any move in this direction would require time. Bucherer’s global presence, with just over 100 stores compared to WoS’s approximately 200 worldwide, suggests that Rolex’s immediate direct involvement is unlikely.

In the short term, the market’s reaction to WoS’s share drop may seem excessive. However, in the long run, Rolex’s ambitions pose a threat to WoS and other watch retailers. With a potential acquisition of WoS on the horizon, analysts estimate its value at around 1.6 billion pounds after the share price drop, making it an attractive target for clone Rolex. The buyout could happen at a multiple of 9 times, implying an enterprise value of 2.5 billion pounds. This figure pales in comparison to Vontobel analysts’ belief that Bucherer is worth 4 billion Swiss francs.

Rolex, a company with an estimated revenue of 8.8 billion Swiss francs in 2022, could see its enterprise value rise significantly. If Rolex follows the three times multiple of Richemont, its closest listed peer, its enterprise value could reach 26 billion Swiss francs.

As WoS’s value continues to decline, its shareholders may find themselves considering a potential acquisition by Rolex as their best and perhaps only favorable option. The Rolex-Bucherer deal has undoubtedly set in motion a series of strategic considerations and potential shifts in the luxury watch retail landscape.