Shares in Watches of Switzerland Group PLC (LSE:WOSG) tumbled by 27% today amid growing concerns that Swiss watchmaking giant, Rolex, might be venturing into direct competition following its acquisition of Bucherer, a leading Swiss watch retailer.
In a bid to quell the rising apprehensions, the London-listed group issued a statement highlighting the longstanding partnership between Rolex and Bucherer.
It emphasised that the acquisition was not a strategic move by Rolex into the retail sector but rather a response to the succession challenges faced by Bucherer SA.
Jorg G Bucherer, the 86-year-old grandson of the founder Carl, has no direct family succession and intends to form a legacy foundation with the proceeds from this transaction.
Watches of Switzerland, a major player in the global watch retail scene alongside Bucherer, further clarified that Rolex will have no operational involvement in Bucherer's business.
The acquisition will not alter Rolex's product allocation or distribution processes. To oversee the transition, Rolex will appoint non-executive board members.
This acquisition comes after Rolex's announcement that it intends to preserve the close partnership ties with Bucherer, which dates back to 1924.
The two companies have shared a rich history, with the cooperation between Hans Wilsdorf, Rolex's founder, and Carl F Bucherer chronicled in official Rolex records.
Senior management from Rolex, both at their Geneva headquarters and local branches in the UK and US, have reviewed and confirmed these details, aiming to provide assurance to stakeholders and the market at large.
Rather than compete directly, analysts fear the allocation of Rolex watches may change to favour Bucherer. This is unlikely to be positive for the UK group, said Peel Hunt, pointing out that over 50% of sales by Watches of Switzerland are Rolex.
"So other brands will have to step up but sentiment will be harmed," the broker added.
"This latter point is key. It is likely that the UK situation and growth profile will be little changed short term but it is hard to have confidence in the speed with which it can develop in the US and Europe. The new long-term plan may reflect this."
Watches of Switzerland shares fell 183p to 510.5p.
Peel Hunt shifted its recommendation to 'hold' with a 600p price target.