- Directors bought almost £900,000 of stock on 1 Sept
- Rolex purchase of Bucherer hit shares hard
- Watches of Switzerland still has substantial growth opportunity
It has been a rough few weeks for investors in Watches of Switzerland (WOSG), whose shares plunged after Swiss luxury watch-maker Rolex agreed to buy retail partner Bucherer, one of Watches of Switzerland’s rivals.
The surprise move raised fears that Bucherer could receive preferential treatment with regards to stock and that Rolex now has a channel through which it can market its products directly to consumers.
However, a subsequent rally continued today with Watches of Switzerland shares ticking up 2.6% to 605p on the news insiders including the chairman and finance director bought the best part of £900,000 worth of stock on 1 September in a show of confidence in the UK’s largest luxury watch seller.
Finance director Anders Romberg stepped in and bought £584,700 worth of stock at around the 585p mark, while chairman Ian Carter bought more than £200,000 worth of shares in the high-end timepieces-to-jewellery retailer, which also sells brands such as TAG Heuer and Audemars Piguet into a luxury watch market where demand continues to outpace supply.
They were joined by non-executive directors Tea Colaianni and Robert Moorhead, who acquired just shy of £50,000 worth of shares apiece.
Directors buying in unison like this after a significant share price slump sends a positive signal to the market.
After all, they are the ones who know the business best.
WHY HAVE WATCHES OF SWITZERLAND SHARES BEEN WEAK?
The big worry for Watches of Switzerland is the tie-up between Rolex and Bucherer could give Bucherer better access to Rolex watches and pave the way for Rolex to expand its direct-to-consumer sales efforts, though a more charitable view is that Rolex is merely securing stability for one of its key distribution partners through the acquisition.
In a statement on 25 August, Watches of Switzerland insisted the Bucherer acquisition is ‘not a strategic move into retail by Rolex’ and stressed ‘there will be no change in the Rolex processes of product allocation or distribution developments as a consequence of this acquisition’.
Shore Capital said the investment case for Watches of Switzerland has long rested upon the assumption that Rolex would never transition towards a direct-to-consumer model. ‘However, the acquisition of Bucherer has shaken the foundations of this belief, raising numerous questions about the future dynamics of the market and Watches of Switzerland’s strategic position within it,’ it added.
But the broker noted the deal does not fundamentally alter the need for consolidation in the US and European markets, ‘where substantial opportunities remain’.
LEARN ABOUT WATCHES OF SWITZERLAND
