Rolex cuts production

[Joearch]

Production upgrades, new equipment, they don’t match presumed market forces.

[CH69]

If Rolex is positioning themselves as a Luxury brand that is supposedly more exclusive than the mass market watch brands (yes, i know their production qty is still WAY more than the independents), then certainly they will adjust their production regularly to ensure supply does not exceed demand to flood the market in alignment with the evolving demand. This is especially true for company that values their long term brand value more the just maiximising shirt term profit, and i would like to think Rolex is in that category.

It is basic marketing. Having the production capacity increase is a good way to position themselves to capture the market when it booms, does not mean they have to maximise / utilise the full production capacity all the time.

[dandy]

I strongly believe that despite the new big factory, Rolex is going to focus on gold and two tone watches and lower the steel production in order to maintain high demand, increase prices and increase profit margins.

[Daytona king]

Originally Posted by dandy

I strongly believe that despite the new big factory, Rolex is going to focus on gold and two tone watches and lower the steel production in order to maintain high demand, increase prices and increase profit margins.

I have heard this too. This is the way of they want to go upmarket. Look at Patek. They are basically killing off the nautilus in SS and you have to go pm if you want one. They have 2 left in SS. I can see them doing that with the aquanaut as well.

The cubitis is the new entry SS sports model now.
If Rolex really wants to achieve this and I believe they do they need to do something bold. Discontinue the SS and two tone Daytona. Make it only available in full gold. In theory it could be done with the submariner too but with less effect.

That would make the SS Daytona even more of a legend. If you want a Daytona the new starting price point will be $42k -50k and up. Maybe this was the plan all along and why the Daytona got a 14 percent price increase. This would help move Rolex in a higher bracket with the big 3. That’s where they want to be. I could definitely see this happening in 2029-2030.


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[CH69]

Originally Posted by Daytona king

I have heard this too. This is the way of they want to go upmarket. Look at Patek. They are basically killing off the nautilus in SS and you have to go pm if you want one. They have 2 left in SS. I can see them doing that with the aquanaut as well.

The cubitis is the new entry SS sports model now.
If Rolex really wants to achieve this and I believe they do they need to do something bold. Discontinue the SS and two tone Daytona. Make it only available in full gold. In theory it could be done with the submariner too but with less effect.

That would make the SS Daytona even more of a legend. If you want a Daytona the new starting price point will be $42k -50k and up. Maybe this was the plan all along and why the Daytona got a 14 percent price increase. This would help move Rolex in a higher bracket with the big 3. That’s where they want to be. I could definitely see this happening in 2029-2030.


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Not sure if the people (myself included) in queue and have been waiting patiently (and sometimes not so patiently) for sooooo long will be happy if they discontinue the SS Daytona.

[Daytona king]

Originally Posted by CH69

Not sure if the people (myself included) in queue and have been waiting patiently (and sometimes not so patiently) for sooooo long will be happy if they discontinue the SS Daytona.

I agree. I think they will follow the patek blueprint though. No one was happy when they discontinued the 5711. They later came out with the 5811 with triple the msrp of the 5711 and you can’t get a 5811. The 5811 is a watch you have to apply for. The 5711 secondary price is over triple retail. (The 5811 at retail is cheaper than a 5711 on the secondary market.)

If you want a Daytona you will have to pay the price. It would also push the secondary market of all the SS Daytonas to close to the price of a new gold Daytona and they would justify buying the gold Daytona now with a ceramic bezel and see through case back.

I can’t think of any other Rolex watch they could do this too and still have the demand to make it work. People want a panda Daytona. They will give it to us in full white gold. Make the sub dials full black instead of rings and a ceramic bezel in full gold. Easy play for them. The waitlist will be to the moon.


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[Gebbeth]

Originally Posted by 77T

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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My only misgiving is that if that GDP number came from official Chinese sources, then I'm not 100% sure I would trust those numbers.

Part of China's downturn is because of GDP numbers that showed a rosy picture of economic growth, when a vast majority of that growth was tied to a highly inflated real estate bubble encouraged by Chinese growth requirements handed down to the various provincial governments.

That was paper growth as the hundreds of billions in malinvestment, ghost cities, and unfinished real estate ventures will attest.

China also refuses to disclose unemployment numbers in their reports.

So, unfortunately, I hold suspect anything coming from the Chinese government nowadays.

[77T]

Where else would Chinese GDP numbers come from?

I don't even trust the ratings agencies that give consensus estimates of earning here!


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[mrlube1151001]

Originally Posted by dandy

I strongly believe that despite the new big factory, Rolex is going to focus on gold and two tone watches and lower the steel production in order to maintain high demand, increase prices and increase profit margins.

Agreed.

[willywilson]

I wish Rolex was publicly traded so we knew the truth. "The Truth is out there."

[Easy E]

I feel like if my intention was to make fewer of a thing I could pull that off for a fair bit less than $1 Billion.

[Spartacus]

Cutting production sounds logical to me, pre owned market is too soft, too many watches on the market, particularly the hot models and PM.

[DoctorsOrders]

Originally Posted by Tim Plains

Why are they opening a new factory? Think about it.

+1. Sounds like OP's AD is closing lol

[BillA]

You would never know the watch market is soft because many of our TS never lower the price. Do these watches sell, I have no idea because they never post “sold”.
However, if they are holding and can’t sell, let me be the first to offer salt and pepper, and a knife and fork. These are the guys who have been shafting us since Covid.

[Eric-London]

Originally Posted by Mystro

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

This!

[StanCho]

Check the # of units sold in 2023 vs 2024 but does not neccesarily imply production decrease.

2023:


2024:


Source, monochrome watches.

[mrlube1151001]

Interesting numbers

[WilsdorfNDavis]

Originally Posted by StanCho

Check the # of units sold in 2023 vs 2024 but does not neccesarily imply production decrease.

Units sold went down but the average price per watch went up $1100, meaning they sold more expensive watches, on average, than last year (in addition the the price increase).

[77T]

Published by Monochrome
Compiled by Morgan Stanley and LuxeConsult
Source: Swiss Federation of the Watch Industry (FHS), exports of Swiss watches

Article: https://monochrome-watches.com/morga...rket-suffered/


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[AEV]

I was going to refer to the MS and LuxeConsult report.
Based on that report they did sell 64.000 watches less. Despite that, the revenue went up by 5% which makes sense given the price increase at the beginning of 2024. Of course we don't have info on their inventory level to assess if indeed production went down.

It's interesting to see that AP sold the same number of watches, while Patek sold more.
I think it is also fair to assume that in 2025 AP and Patek will push Omega down the list.

[dtwer]

I think the prices in the US would only go up with the reciprocal tariffs taking effect. Time for Rolex SA to consider building a manufacturing facility in the US, lol.

[1William]

I saw the report on Monochrome and as usual it has some glairing questions left unanswered. Without a market analysis of the 1/3/5/10 and even 15 and 20 year data this an incomplete report with conclusion drawn based on limited data. It seems that many want to use a limited time window of Covid and the market highs for watches and then extrapolate conclusions based on that data. This is what happens when finance people get involved in looking at anything that is just not numbers and we all know that it is a lot more than that.

[JonnyOld Boy]

You can actually make MORE margin by selling FEWER watches. It's not rocket science , and it was perhaps apparent when the last offerings were unveiled that the longer game plan for Rolex was to stop the bun fight for a zillion different SS watches and maybe adjust the brand slightly.

[mrlube1151001]

I think the margins must be higher in TT and gold watches.They might produce less steel watches and push these TT and gold watches.So chances are less production and more margins.In business people don’t care about volumes but bottom line.

[77T]

That's probably true Mani.

Net margin yield for the Foundation demands a premium-skewed product mix. TT and PM models are marked up well above the value of the extra PM in the watch/bracelet.

I would kill the entire SS line in favor of Pt. or WG. $65K on Subs. Same for DJs, OPs, GMTs, all same.

Damped demand would allow more inventory in every AD's showcase.

No TT - they drop in value anyway due to weak demand. Kill them.

YG and RG would be special orders, 50% NRD + 2 yr wait.

Then work Titanium into Sub, GMT, OP, etc line ups.


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[mrlube1151001]

Look at what patek doing.They have gotten rid of most of the steel watches and concentrating on P.M watches. Better margins I hope.

[njlam]

The price of gold is going up faster than MSRP for PM Rolexes, so their margins on PM watches is getting squeezed.

If Rolex is profit maximizing, they should increase production of their steel models...

[Duke Nukem]

Rolex CEO last year at W&W did an interview and publicly disclosed they're focusing heavily on PM due to wider margins so this is no surprise. That's why last year had so many new gold variants which imagine will continue into this year.

[Gebbeth]

The interesting thing about Rolex going to a PM heavy lineup is that secondary prices for a larger chunk of PM Rolex models are going for less than retail price.

I know Rolex doesn’t care, but I wonder if this means even more downward pressure on existing PM models in the secondary market.

It’s has been argued that this is one of the reasons why ALS, for example, seem to have horrid secondary market price retention even if they are regarded as a high horology standard by some. The entire line is PM other than one line of the Odysseus, and it’s this one model that seems to be the most desired and the one that sells for way above the retail price.

[BraveBold]

Originally Posted by njlam

The price of gold is going up faster than MSRP for PM Rolexes, so their margins on PM watches is getting squeezed.

If Rolex is profit maximizing, they should increase production of their steel models...

Even if the cost is rising more than their price increases, they likely have significantly higher contribution margins on their PM watches. They benefit from shifting (relative) production in favor of PM.

More likely, they are seeing demand drops across the board and see greater risk of negative brand impact if suddenly SS watch inventory rises significantly. It is also likely a more volatile segment: a) speculators jump in but have jumped out from many models and b) the entry cost is lower and generally has a much, much larger market that is more price sensitive. On average.

Reality is that an overall production cut (totals) is more likely to be what plays out in 2025… I find it harder to believe that Rolex is unaffected (unlike competitors) given its sales volume.