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One FTSE 250 stock that has seen its shares on a downward trajectory for some time now is Swiss Watches Group (LSE: WOSG). What happened? Is there a buying opportunity here or not? Let’s take a closer look.
Why has the Watches share price fallen so much?
Watches of Switzerland is a luxury watch, jewellery, fashion and after-sales services company with a presence in the UK and US. However, it makes most of its money in the UK.
As I write, Watches shares are trading at 491p. They have fallen a considerable 41% in a 12-month period. Last year at this time they were trading at 788 pence. For context, the FTSE 250 index as a whole is now in much the same position as this time last year.
One of the main reasons Watches stock has fallen so much is the fact that in August, Rolex announced that it had purchased Bucherer, which owns and operates around 100 stores around the world. Rolex is by far the world’s largest manufacturer by revenue. He usually sells his watches through distributors such as Watches of Switzerland Group. However, there are fears that it could move into retail and direct-to-consumer trade. Watches, you could see your sales fall off a cliff if Rolex abandons you.
Watches issued a statement a few days after the news broke to allay fears and downplay Rolex’s move. However, it seems that the market was already scared.
The investment case
There are a few considerations I need to keep in mind when it comes to the watch investment case. Firstly, in times of economic crisis and volatility, such as now, those who can afford such luxuries are usually not affected. This means they can go about their daily lives and continue buying whatever they want. In turn, companies like Watches should not see too much of a detrimental impact on their performance levels.
Furthermore, according to sources such as Oxfam and Credit Suisse, the number of rich people and global wealth in general is only increasing. This is good news for luxury goods companies, such as watches. This burgeoning wealth could help boost the FTSE 250 holder’s performance and investor profitability.
Finally, Watches shares appear to be good value for money with a forward P/E ratio of 13. However, this is based on analyst projections for current full-year results and do not always come to fruition.
A FTSE 250 stock I’m watching for now
Despite operating in a market that is generally unaffected by global economic volatility and having a decent valuation following its share price drop, Watches is not a stock I’m going to buy today.
The main reason for this is the recent move by Rolex. It would make sense if Rolex decided to move into retail, as it could increase revenue and profits on an unprecedented scale.
For now, I will be keeping an eye on the Watches of Switzerland Group’s stock, especially future performance updates, as well as general market news related especially to Rolex. There are better FTSE 250 shares that I will consider for my holdings at the moment.
