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05 September 2023

Market Round-Up

Rolex, the Swiss watch designer founded by Hans Wilsdorf, has announced plans to acquire luxury watch and jewellery retailer Bucherer. Rolex watches are scarce and in high demand and the Hans Wilsdorf Foundation has a tight control on the selection of retailers and the number of authorised distributors.

There are fears Rolex will favour Bucherer as a stockist and distribute more of its supply to them. Concerns have been raised this could present an obstacle for competitor Watches of Switzerland in the future and the news of the acquisition caused the share price of Watches of Switzerland to drop by more than a quarter.

Bucherer has around a hundred sales outlets globally, of which 53 distribute the Rolex brand. Despite assurances the foundation has no plans for a retail model which sells directly to consumers, analysts have flagged concerns about a retailer which is heavily reliant on a single supplier.

Elsewhere, there are fears the UK housing market could face a further slowdown if interest rates continue to increase, resulting in higher mortgage rates. UK property developer, Crest Nicholson, recently issued a profit warning after it sold fewer properties than expected over the past 12 months. Rising interest rates have made loans more expensive and operating costs higher, resulting in lower demand for housing.

Other construction companies such as Taylor Wimpey and Persimmon, are both forecast to see a decline in profits. David O’Leary, Executive Director at the Home Builders Federation, has highlighted how the high cost of borrowing comes on the heels of the withdrawal of the Government's Help to Buy scheme which supported first-time buyers. As a result, there are concerns that companies will need to cut costs to maintain short-term profits.

Persimmon slashed its dividend payout by 75% this year, with rival Barratt Developments expected to follow. Analysts have warned homebuilders may have to lower sale prices if the current UK economic conditions persist.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. The value of investments and any income derived from them may go down as well as up and you could get back less than you invested.
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