Jordan Hart/BI
- It's a bad idea to view luxury watches like they're investments, the CEO of Rolex said.
- "This sends the wrong message and is dangerous," Jean-Frédéric Dufour told NZZ last week.
- Secondhand watch prices have tumbled since the Federal Reserve started raising interest rates.
If you think an expensive watch is akin to an investment that can offer stock market-style returns, you're doing it all wrong — according to the CEO of Rolex at least.
"I don't like it when people compare watches to stocks. It sends the wrong message and is dangerous. We make products, not investments," Jean-Frédéric Dufour told Swiss newspaper NZZ last week.
His comments as secondhand watch prices slide after spectacular pandemic-era growth.
WatchCharts' Overall Market Index, which tracks prices, spiked 72% between January 2021 and March 2022 as retail investors who got rich trading cryptocurrencies and meme stocks sought to diversify their portfolios.
Since that peak, the gauge has tumbled 38%, while the benchmark S&P 500 index of US stocks is up 13% over the same period.
Watch prices started dropping as the Federal Reserve started raising interest rates. Between May 2022 and July 2023, the central bank jacked up borrowing costs from near-zero to about 5%. When interest rates are higher, demand for big-ticket items tends to fall, because there's more incentive for consumers to save rather than spend.
Dufour, who's been Rolex CEO since 2015, also told NZZ he's expecting a "challenging" year. Luxury watch companies such as Rolex, Patek Philippe and Audemars Piguet can't necessarily cut prices to stimulate demand, he added.
"It marks the end of a phase in which all manufacturers have been doing well. In good times, production tends to be too high. When markets weaken, as is the case now, retailers come under pressure to cut prices. This is extremely problematic because discounts damage emotional products like ours," Dufour said.
A year ago Patek Philippe chairman Thierry Stern warned that the market for luxury watches was "slowing down."
His company makes the coveted Nautilus sports watch and only produces between 60,000 and 70,000 watches a year, which start at about $30,000.