A Rolex seller loses $600 million when the watchmaker buys a retailer

A Rolex seller loses $600 million when the watchmaker buys a retailer

(Bloomberg) — The UK’s largest seller of Rolex watches lost nearly a third of its value on Friday after the Swiss brand bought Bucherer AG, making its first major move into retail.

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Shares of Watches Group Plc fell as much as 30%, resulting in a loss of nearly £500m ($629m) in market value.

Rolex revealed the surprise move to buy Bucherer late Thursday, leading analysts to wonder what the deal means for the future relationship between Watches of Switzerland and the brand. Jonathan Pritchard of Peel Hunt noted that Rolex accounts for half of the company’s sales, and downgraded the stock to keep it from buying.

Rolex executives have assured the brand’s largest UK retailer that watches will continue to be customized through the same distribution system, Watches of Switzerland CEO Brian Duffy said in an interview.

“Nothing has changed with regard to Rolex,” he said.

Duffy said the purchase was an “elegant solution” to the succession challenges at the family-owned Bucherer. The retail store was founded by Carl F. Bucherer in 1888 and he wanted to remain Swiss-owned.

“Rolex will have no operating involvement in Bucherer’s business,” the Swiss watch company said in a statement.

Analysts remain skeptical. “The market today is bound to debate the extent to which the news indicates an increased risk of weakening the future importance of Swiss watches as a key supplier to the group,” James Grzenich of Jefferies wrote in a note.

Pritchard of Bill Hunt said the concerns “are likely to act as a cloud over stocks for the foreseeable future.”

The stock has already been under pressure this year amid concerns about declining sales and slowing demand for high-end watches.

(Updates with comments from the CEO of Watches of Switzerland)

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