Loved this. I am the proud guardian of three “Rolexes of the dead,” a Submariner red inherited from my husband that I gifted him in 1974, a Daytona inherited from my best friend, and a Datejust inherited from my oldest friend. None of them will ever be for sale.
How does the "equity" looting of Rolex stores during "peaceful protests" square with the unobtanium narrative? And does that tarnish the brand, since exclusivity is a huge part of its cachet?
I've adjusted my views since then after spending more time on WOSG; I think the risk of Rolex disintermediating them is very low, but with the current tariff dynamic makes the investment case more difficult. I'm assuming a lot of the burden will be taken by WOSG (who has very little/if any power or say over Rolex). I'm guessing part of it will also be mitigated through higher pricing and Rolex taking a bit of the hit, but it will be difficult until we see where the tariff for Switzerland finally ends up (and likely WOSG will end up with lower margins). They will have to pull their LRP pretty soon.
Very much appreciate for your updated view on $WOSG!
#1 I can't say anthing regarding the Rolex D2C risk
#2 Agree in regard to tariffs. If we end up with 20 to 25% final tariffs they would need to increase ASP by 6 to 10% (assuming wholesale is 60 to 65% of ASP). Def price hikes are in the cards but some part will end up on WOSGs P&L over the next 12 to 24 months.
So yes - I expect a guidance cut as well
#3 I am having a questionmark about business transparency by management when looking through "Buffett lenses". The adjusted numbers of FY24, FY25 are a joke - store closures are a normal part of operations of a retail chain - they belong into the income statement - also in the adjusted numbers. Moving to the Cash-Flow numbers. 3M pounds CAPEX in FY25 for store maintenance - this is like 15k p.a. per store (~200 stores)>>> Seems far to low to me. At least long-term!
- Adjusting FCF for lease-interest we are looking at ~75M pounds FCF imo
- more in line with the statutory net income of 54M pounds. (AVG last 5 years = 77M; AVG 5y is likely a good number to look at - record margins & net income growth should balance each other )
I am ignoring the 8x Fwd P/E based on analyst targets / adj numbers because of the reasons explained before >> Likely it is more in the 10x - 12x range for FY26 - depending on impairments at 10% tariffs
Tariffs
If tariff end up in the 20 to 25% range this will likely shred another 100bps net income margin in FY 26 - possibly bringing it down to sub 2% net income margin? (statutory profits)
>> Implying ~15 GBX EPS (P/E Fwd 26 ~22)
But everything has a price right? The company has come down a lot. What is a fair multiple for WOSG? ~18-22 if growing at 7 to 9% p.a.
The market became overexcited 2021 assigning it a luxury brand like P/E of 40 to 50. Since the Bucherer aquisition the market came to realize that was wrong...
>> Fair P/E = 18-22?
Final though - Agree:
With the tariff impact we could see more pain ahead that is not yet fully priced in and will show up over the next quaterly reports.
Great write-up!
thank you!
Loved this. I am the proud guardian of three “Rolexes of the dead,” a Submariner red inherited from my husband that I gifted him in 1974, a Daytona inherited from my best friend, and a Datejust inherited from my oldest friend. None of them will ever be for sale.
One guy I knew never set his Rolex to the correct time. Strictly ornamental...
Return of the the King! Great piece
Thanks for a great post!
Great stuff Sleep - and glad to have you back!!!
Damn today is a good day. Sleepwell is BACK
How does the "equity" looting of Rolex stores during "peaceful protests" square with the unobtanium narrative? And does that tarnish the brand, since exclusivity is a huge part of its cachet?
I don't quite understand the question, can you rephrase?
What do you think of the idea of investing in Rolex retailers such as Watches of Switzerland?
https://x.com/SleepwellCap/status/1694747503101358350
I've adjusted my views since then after spending more time on WOSG; I think the risk of Rolex disintermediating them is very low, but with the current tariff dynamic makes the investment case more difficult. I'm assuming a lot of the burden will be taken by WOSG (who has very little/if any power or say over Rolex). I'm guessing part of it will also be mitigated through higher pricing and Rolex taking a bit of the hit, but it will be difficult until we see where the tariff for Switzerland finally ends up (and likely WOSG will end up with lower margins). They will have to pull their LRP pretty soon.
Very much appreciate for your updated view on $WOSG!
#1 I can't say anthing regarding the Rolex D2C risk
#2 Agree in regard to tariffs. If we end up with 20 to 25% final tariffs they would need to increase ASP by 6 to 10% (assuming wholesale is 60 to 65% of ASP). Def price hikes are in the cards but some part will end up on WOSGs P&L over the next 12 to 24 months.
So yes - I expect a guidance cut as well
#3 I am having a questionmark about business transparency by management when looking through "Buffett lenses". The adjusted numbers of FY24, FY25 are a joke - store closures are a normal part of operations of a retail chain - they belong into the income statement - also in the adjusted numbers. Moving to the Cash-Flow numbers. 3M pounds CAPEX in FY25 for store maintenance - this is like 15k p.a. per store (~200 stores)>>> Seems far to low to me. At least long-term!
- Adjusting FCF for lease-interest we are looking at ~75M pounds FCF imo
- more in line with the statutory net income of 54M pounds. (AVG last 5 years = 77M; AVG 5y is likely a good number to look at - record margins & net income growth should balance each other )
at 330 GBX
>> Implying P/E LTM = 12x; EV/FCF (exlc. lease libailites in debt) ~ 12x
I am ignoring the 8x Fwd P/E based on analyst targets / adj numbers because of the reasons explained before >> Likely it is more in the 10x - 12x range for FY26 - depending on impairments at 10% tariffs
Tariffs
If tariff end up in the 20 to 25% range this will likely shred another 100bps net income margin in FY 26 - possibly bringing it down to sub 2% net income margin? (statutory profits)
>> Implying ~15 GBX EPS (P/E Fwd 26 ~22)
But everything has a price right? The company has come down a lot. What is a fair multiple for WOSG? ~18-22 if growing at 7 to 9% p.a.
The market became overexcited 2021 assigning it a luxury brand like P/E of 40 to 50. Since the Bucherer aquisition the market came to realize that was wrong...
>> Fair P/E = 18-22?
Final though - Agree:
With the tariff impact we could see more pain ahead that is not yet fully priced in and will show up over the next quaterly reports.
$200 in 1957 is $2160 in 2023 dollars....I have a 1962 Rolex and love it.