I didn’t want to go there.
Watches of Switzerland Group CEO Brian Duffy told financial reporters yesterday that it had downgraded forecasts for its 2024 financial year, which ends in April, in part because its allocation of Rolex’s more expensive watches was lower than expected when he gave a far more bullish trading update last November.
He clarified that Rolex is still supplying the same number of units, but there was more steel and less gold in the key holiday season, which lowered average transaction values for the entire group, and he has no reason to believe that gold/steel balance will change this financial year.
A single word WhatsApp: “Bucherer“, arrived from a fellow watch reporter moments later.
I didn’t want to go there, not least because I’ve been hearing from Rolex retailers in the UK and USA that they’d been told last year to expect more steel to come through — something your typical watch enthusiast has been crying out for to bring down waiting lists.
But Financial Times city editor Bryce Elder read my mind, or got the same WhatsApp, and posed the question of whether Rolex’s acquisition of Bucherer in August last year has impacted supply in an article yesterday titled What the Watches of Switzerland warning says about Rolex demand.
“It’s impossible not to wonder if the relationship with Rolex is in decline already: both WoS and Rolex were all out to say otherwise post the Bucherer deal, but this quarter’s allocation does beg the question. Either way, the change in product mix was extremely damaging and will likely continue to be so,” Jonathan Pritchard, an analyst with investment bank Peel Hunt said.
I love a conspiracy theory as much as the next man, but I believe the WoSG downgrade had nothing to do with Rolex buying Bucherer.
Tapering from gold to steel watch production by Rolex is a sensible and well-timed reaction to moderately wealthy people — Rolex’s core demographic — suffering a financial squeeze.
It should shorten waiting lists for the most popular models in steel, possibly even bringing supply and demand into balance. It might even be possible to increase unit production if manufacturing switches from time-consuming gem-set ladies pieces to simpler tool watches.
In other words, the market is returning to normal, and all brands and retailers will need to adjust.
Watches of Switzerland just might be approaching the upper limit of market share for Rolex in the UK, at least until it opens Europe’s biggest Rolex flagship on London’s Bond Street in 2025.
In the meantime, I am sure it will take the view that “Rolex is always right”, a mantra that has served all of its authorised dealers well for decades.