Watches of Switzerland is finding life as a publicly-listed company increasingly uncomfortable.
Legally required to keep investors informed with quarterly updates, it has to explain any deviation from previously stated forecasts.
Not a problem when performance meets or exceeds earlier forecasts, as has been the case since its 2019 initial public offering, but uncomfortable when they fall short as they did today.
My confidence in the long term prospects for the group is undimmed.
It is run by an experienced an expert executive team that grew it from a successful multi-store jeweller in Britain to a giant in luxury watches in the United States and the UK.
Its first growth spurt came with the financial support of private equity giant Apollo Global Management, which helped finance a dramatic expansion of Watches of Switzerland (the retail brand that later became the group’s name) first in the UK with a “golden triangle” of London showrooms and then in America following the acquisition of Mayors.
Success on both sides of the Atlantic created the conditions for the 2019 stock market floatation that valued the group at £650 million.
Three years later, assisted by booming sales for Rolex, that valuation peaked at over £3 billion.
It has been downhill since that 2022 peak, as far as the share price is concerned, which this morning dipped below 400p.
That may prove to be an overreaction from investors, but they were spooked by the scale of a downgrade for turnover and profit this year, so soon after a forecast last November said everything was on track.
CEO Brian Duffy said predicting performance over the peak holiday period was tougher than he had ever seen in decades of retail.
He suggested that consumers switched spending from hard luxury goods like watches and jewellery and into more leisure: holidays, meals out, entertainment, etc.
But he also dropped a bombshell about allocations of Rolex watches.
He said he had been caught out when supplies to the company of expensive watches in precious metals were squeezed and replaced with cheaper pieces in steel.
The same number of watches, but lower average prices, crimped top line sales.
This is an extraordinary admission that is unlikely to have landed well at Rolex, but presumably had to be shared in a statement from a publicly-traded business.
Mr Duffy also has form. Explaining a small dip in UK sales in the summer and autumn quarters of 2023, he said part of the problem was a bulge in supply for “supply-constrained brands” — read Rolex — the previous year that was difficult to beat a year later.
So, when business is great, the retailer is a genius, but when it is tougher, some of the blame is deflected onto brands; a tactic that I would suggest is quickly retired.
And this raises an important question: is it desirable for such a key retailer for Rolex (and other private watchmakers such as Patek Philippe and Audemars Piguet) to be listed and bound by stock market transparency rules.
I think not, and I wonder whether the likes of Rolex and Patek Philippe, agree.
Discretion is a pillar of luxury, and nobody does discretion like the Swiss.
We may never know whether Watches of Switzerland Group was in the running to buy Bucherer before its patriarch passed away last year, but Rolex’s acquisition made sure it would not be acquired by a publicly-traded group or private equity, which would have led to far greater scrutiny going forward than being owned by the same opaque foundation as Rolex.
That scrutiny is unavoidable while Watches of Switzerland Group remains listed on the London Stock Exchange. I wonder for how long that will continue to be the case.