Rolex cuts production

[77T]

With many luxury watch brands reporting a slump in sales over the past quarter and overall for the past fiscal year, Rolex could be reining in the targeted product mix.

That might be part of the messaging the distributors are sharing with their national ADs. For example, European and Americas may see less product. Middle East and Asia conversely more.

Saudi and others in ME are investing heavily in development and growth. This unlocks stronger demand in the luxury segment.

China has been retooling economic action again primarily focused on stimulating domestic demand through policies aimed at boosting consumer spending. A significant emphasis on revitalizing the real property sector, better sustainable growth in the service sector, and that could unlock renewed demand for luxe goods.

This is why some of the posts here are showing different tales of supply - growth in some areas but shrinkage in others.


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[Zedder]

Originally Posted by GMTmatt

If they are not different why does Rolex not increase production of the Daytona at the expense of a lower demand model? Luxury products are a different breed. Do you really think Rolex wants to go back to the days where every model (except stainless Daytona) was sitting in the case waiting for any boob to walk in from the street and buy? And why do you think Rolex is culling the amount of AD’s when they already sell everything they make? Exclusivity.

I’m not sure why you think other manufacturers don’t restrict supply simply because they aren’t producing luxury goods? I can assure you that some that I have worked for absolutely do. That’s how we do not flood the market and drive our prices down. It’s also how we created fomo/hype with new product introductions and limited editions. We also had limited material inputs for some products which dictated very strict capacity restraints and kept prices/margins high. Rolex is no different than many manufacturers.

[enjoythemusic]

source: https://www.fhs.swiss/eng/statistics.html

[inadeje]

Unsubstantiated hearsay.

Everything indicates the opposite, including increased production ability at new manufacturing sites. Rolex has always played the “informal rumor” game to generate hype. Unfortunately, right now it will fall on deaf ears.

[inadeje]

Originally Posted by enjoythemusic

source: https://www.fhs.swiss/eng/statistics.html

Attachment 1484136

Attachment 1484137

See how India cancelled out the descent in Chinese imports?

[BraveBold]

Quite a volume drop globally, considering there were price hikes in those figures.

The China drop-off in particular is incredible.

We all know this, of course, as the public companies announced sales declines for major Swiss watch brands.

Originally Posted by enjoythemusic

source: https://www.fhs.swiss/eng/statistics.html

Attachment 1484136

Attachment 1484137

[BraveBold]

Originally Posted by Zedder

I’m not sure why you think other manufacturers don’t restrict supply simply because they aren’t producing luxury goods? I can assure you that some that I have worked for absolutely do. That’s how we do not flood the market and drive our prices down. It’s also how we created fomo/hype with new product introductions and limited editions. We also had limited material inputs for some products which dictated very strict capacity restraints and kept prices/margins high. Rolex is no different than many manufacturers.

Actually, most manufacturers would continue to sell so long as you have positive CM. Economically that tends to make the most sense since most are “price takers”… or nearly so, with limited ability to impact pricing beyond a limited range… withholding supply would be disproportionately self-punishing because most products are in highly price-competitive markets.

So, no, Rolex is not like most manufacturers and doesn’t behave like most manufacturers. There are of course many examples of businesses that do behave like Rolex, but they constitute a small percentage of all businesses.

[BraveBold]

Originally Posted by 77T

With many luxury watch brands reporting a slump in sales over the past quarter and overall for the past fiscal year, Rolex could be reining in the targeted product mix.

That might be part of the messaging the distributors are sharing with their national ADs. For example, European and Americas may see less product. Middle East and Asia conversely more.

Saudi and others in ME are investing heavily in development and growth. This unlocks stronger demand in the luxury segment.

China has been retooling economic action again primarily focused on stimulating domestic demand through policies aimed at boosting consumer spending. A significant emphasis on revitalizing the real property sector, better sustainable growth in the service sector, and that could unlock renewed demand for luxe goods.

This is why some of the posts here are showing different tales of supply - growth in some areas but shrinkage in others.


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Agreed - which is why while we cannot verify the absolute certainty (or even likelihood) it is easy to see the potential for a production cut (net) and the underlying logic. Regardless of the current perception “on the ground”…

[77T]

My post was meant to support the proposition that there isn't a true cut in production. Rather a shift in geographic distribution.

The factory expansion that is already underway plus the hiring of watchmakers going through their certification pathways suggests they are poised to increase total production this year.


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[BraveBold]

Originally Posted by 77T

My post was meant to support the proposition that there isn't a true cut in production. Rather a shift in geographic distribution.

The factory expansion that is already underway plus the hiring of watchmakers going through their certification pathways suggests they are poised to increase total production this year.


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We don’t know. We just know peers are cutting production. Rolex may stand alone and increase, regardless of global demand reduction. That is entirely possible. But regional distribution changes are unlikely to be setup in a way to target a particular global net result.

It is all about the tradeoffs Rolex is comfortable accepting. I just would not be surprised one bit if their total production is down in 2025, even if only an immaterial amount. Also wouldn’t be surprised if increased… but their long-term capacity planning or decisions made in 2022 on a tiny ramp of production will have no bearing on the outcome.

[Maleg]

Part of what's missing in this discussion is that Rolex doesn't sell anything direct to the end users. Their customer is the AD and their strategy is to support the AD's profitibility. Tightly controlling inventory so that floorage at the AD is minimal promotes AD profitibility. They aren't sitting on debt or discounting to move product. But, they need to be provided enough product to be profitable. That inventory balance formula is a mystery to all but Rolex.

I wander through a lot of AD's and I am not seeing available inventory in the showcases. While my experience is infinitesimal in the grand scheme of things, I'm also reading the same here and elsewhere. At least anecdotally, Rolex seems to have the right amount of inventory in the AD's to maintain a good turnover ratio. I don't see any evidence that Rolex would benefit from upsetting the status quo with a global inventory reduction.

[77T]

Originally Posted by Maleg

Tightly controlling inventory so that floorage at the AD is minimal promotes AD profitibility.


I don't see any evidence that Rolex would benefit from upsetting the status quo with a global inventory reduction.

Actually all ADs are being asked to increase or upgrade the square footage devoted to Rolex.

The inventory is mostly "display only".

I do agree they aren't looking to become less efficient in their CAPEX + OPEX.


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[Maleg]

Originally Posted by 77T

Actually all ADs are being asked to increase or upgrade the square footage devoted to Rolex.

The inventory is mostly "display only".

I do agree they aren't looking to become less efficient in their CAPEX + OPEX.


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By floorage I mean the interest the AD is paying on debt for inventory awaiting to be sold.

[Calatrava r]

Mentioned a lot here, but I think Rolex likes the scarcity and empty cases with people having to "express interest" and then wait for their watch. They may adjust production as needed to maintain the current status quo. They may realize that having easy availability with the corresponding drop in FOMO and secondary market values, could really hurt retail demand.

[mrlube1151001]

full gold watches have become quiet expensive now.Except high net worth individuals I don’t know how others can afford.

[WILLIWALKER]

Originally Posted by Mystro

No one knows anything. Rolex never ever discloses any info.

I can only agree.

Between the different departments of the same place, it is already very complicated at Rolex. Even more so between a place where they manufacture the bracelet / cases, that of the movements etc, they operate as customer / supplier even within the same company / department, no information circulates even within the companies.

In any case: no drop in orders BUT the stocks in Geneva are HUGE. And when it will be felt on the production lines then the subcontractors, it will smell of burning

[wm82]

A lot if not most of Rolex "new factory" is geared towards after sales service. They make 1.2m watches a year that all need service within 10 years of sale and all the parts needed etc the need is growing at exponential pace while there's fewer and fewer service centers available locally around the world.

[Rolexatlast]

I can quite see that availability is overtaking demand for some models - e.g. 28mm datejusts, full gold, etc.

So seems reasonable that Rolex may be throttling back production on such models, to keep the availability/demand ratio <1

[GMTmatt]

Originally Posted by Zedder

I’m not sure why you think other manufacturers don’t restrict supply simply because they aren’t producing luxury goods? I can assure you that some that I have worked for absolutely do. That’s how we do not flood the market and drive our prices down. It’s also how we created fomo/hype with new product introductions and limited editions. We also had limited material inputs for some products which dictated very strict capacity restraints and kept prices/margins high. Rolex is no different than many manufacturers.

I stand behind my original comment that comparing to Rolex to GM and Fortune 500 companies is a poor comparison. It is fine if you disagree. Have a good day cafe.

[ArtNouveau]

Originally Posted by Mystro

No one knows anything. Rolex never ever discloses any info.

I agree with the big picture version here, RolexSA has a legacy of not having to answer to anyone and so they don’t.
Anecdotally though I’m on good terms with SAs at both of the ADs I am in contact with. Just like I enjoy sharing watch gossip with them, their RolexUSA reps do the same with them.
That said what they share is pretty superficial and that rep only knows what he needs to from HQ. I believe US ADs are told their yearly allocations each year and that’s about it.

[enjoythemusic]

Originally Posted by 77T

My post was meant to support the proposition that there isn't a true cut in production. Rather a shift in geographic distribution.

+1 Paul.

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Still, imho OVERALL production is up compared to.... you know. Nice to see a broader demand for horology, and ultra-hand created is at all-time highs since those reeeeally early days.

jmho

Let the good times roll

[Triggerfish]

Originally Posted by Rolexatlast

I can quite see that availability is overtaking demand for some models - e.g. 28mm datejusts, full gold, etc.

So seems reasonable that Rolex may be throttling back production on such models, to keep the availability/demand ratio <1

I wanted to source a 28mm for my wife and my AD told me they never see them and it would be a waste to even put it on a request list!

[Andad]

Originally Posted by Maleg

Part of what's missing in this discussion is that Rolex doesn't sell anything direct to the end users. Their customer is the AD and their strategy is to support the AD's profitibility. Tightly controlling inventory so that floorage at the AD is minimal promotes AD profitibility. They aren't sitting on debt or discounting to move product. But, they need to be provided enough product to be profitable. That inventory balance formula is a mystery to all but Rolex.

I wander through a lot of AD's and I am not seeing available inventory in the showcases. While my experience is infinitesimal in the grand scheme of things, I'm also reading the same here and elsewhere. At least anecdotally, Rolex seems to have the right amount of inventory in the AD's to maintain a good turnover ratio. I don't see any evidence that Rolex would benefit from upsetting the status quo with a global inventory reduction.

[Andad]

Originally Posted by inadeje

See how India cancelled out the descent in Chinese imports?

You should add up the ones above?

[ninjin]

Picked up a GMT on Saturday and the Sales Manager (been buying from them for over 15yrs) told me that Rolex have informed them that they will be getting less stock from Rolex in 2025 compared to 2024.

[Gebbeth]

Originally Posted by Maleg

Part of what's missing in this discussion is that Rolex doesn't sell anything direct to the end users. Their customer is the AD and their strategy is to support the AD's profitibility. Tightly controlling inventory so that floorage at the AD is minimal promotes AD profitibility. They aren't sitting on debt or discounting to move product. But, they need to be provided enough product to be profitable. That inventory balance formula is a mystery to all but Rolex.

I wander through a lot of AD's and I am not seeing available inventory in the showcases. While my experience is infinitesimal in the grand scheme of things, I'm also reading the same here and elsewhere. At least anecdotally, Rolex seems to have the right amount of inventory in the AD's to maintain a good turnover ratio. I don't see any evidence that Rolex would benefit from upsetting the status quo with a global inventory reduction.

This was definitely true in the past. Not so much now, and who knows what Rolex’s plans are given they have substantially reduced their AD numbers.

After all, they did just buy Bucherer and shut down Bucherer’s own watchmaking efforts.

So, assuming the ADs are their customers is not 100% true.

Also, a disti network is not really a corner per se. It’s really a cost to Rolex’s distribution efforts. No Rolex AD is going to turn down Rolex allocations, so they are not really a “customer” in the traditional sense.

[Gebbeth]

Originally Posted by 77T

With many luxury watch brands reporting a slump in sales over the past quarter and overall for the past fiscal year, Rolex could be reining in the targeted product mix.

That might be part of the messaging the distributors are sharing with their national ADs. For example, European and Americas may see less product. Middle East and Asia conversely more.

Saudi and others in ME are investing heavily in development and growth. This unlocks stronger demand in the luxury segment.

China has been retooling economic action again primarily focused on stimulating domestic demand through policies aimed at boosting consumer spending. A significant emphasis on revitalizing the real property sector, better sustainable growth in the service sector, and that could unlock renewed demand for luxe goods.

This is why some of the posts here are showing different tales of supply - growth in some areas but shrinkage in others.


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If Rolex and luxury watchmakers are hoping that China will rebound soon, they are going to have to wait awhile. There is no indication that the current direction of China is going to turnaround in the next 4 years. It may not get worse, but western luxury brands are going to have a tough time in the near future.

As for being able to turn on and off a factory, it’s not that easy. You need to staff up and train personnel. You can’t just decide one day to shutdown a factory and hope to have it running again at a moments notice. It becomes a wasting asset with no return on investment and just a black hole of expense and depreciation. Utilization rate is a key metric.

That being said, who knows what Rolex can and is prepared to do.

[SVH]

China is done for at least the next century. It's not coming back as an economic or military force.

[WilsdorfNDavis]

"My AD said..."

[77T]

Originally Posted by Gebbeth

As for being able to turn on and off a factory, it’s not that easy. You need to staff up and train personnel. You can’t just decide one day to shutdown a factory and hope to have it running again at a moments notice. It becomes a wasting asset with no return on investment and just a black hole of expense and depreciation. Utilization rate is a key metric.

I totally agree and believe the new factory will be online as quick as possible. There are some green shoots...

Economic activity surprised to the upside in China for 4Q. Real GDP rose at an annual rate of 5.4%.

That year-end dash was propelled by the consumer goods trade-in program. Exporters also benefitted from front-loaded orders before a likely increase in U.S. tariffs.

Also agree there is no freaking way to know what will happen. My guess is the new models for 2025 will max out 1&2Q production numbers. Then management will look at what should be done for 2H.


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