Inflation Is a Good Thing for Seller of Used Rolexes Eyeing IPO
(Bloomberg) -- Chrono24, the biggest platform for selling secondhand luxury watches, says the resale market is surging as investors seek a shelter from inflation, buoying prospects for a potential initial public offering.
The platform, whose financial backers include the tech-focused investment arm of LVMH founder Bernard Arnault’s family, grew more than 40% by transaction value in the first quarter, co-Chief Executive Officer Tim Stracke said in an interview.
The surge reflects demand for used watches from Swiss brands such as Rolex, Audemars Piguet and Patek Philippe -- family controlled firms with limited production capacity. Concerns about inflation are also stoking demand because some luxury timepieces can be seen as a store of value and a guard against currency fluctuations.
“What we are seeing now is more a fear of inflation and a general strong demand for watches, which translates into higher sales but also higher average order values,” Stracke said.
Some models have seen secondary market prices skyrocket during the pandemic. Audemars Piguet’s Royal Oak steel sports watch with a blue dial, for instance, now costs about 107,000 Swiss francs ($110,000) on the platform, up from about 46,447 francs in April last year.
While luxury watch retail sales are growing by as much as 3% a year, the secondary market is gaining about 10% a year and is expected to reach $29 billion to $32 billion in revenue by 2025, according to consulting firm McKinsey.
Stracke says he doesn’t regard the current price surge as a bubble that risks bursting, because demand and prices have increased steadily and the supply is stable.
Chrono24 estimates that about 2 billion euros ($2.2 billion) worth of transactions were conducted or initiated on its platform last year. There are currently about half a million watches for sale on the website.
The closely-held company says it’s profitable, with earnings before interest, taxes, depreciation and amortization margins “well into the double digits,” according to Stracke. He declined to provide financial details.
Based in Karlsruhe, Germany, Chrono24’s platform connects international watch dealers and private sellers with buyers around the world. It earns revenue through monthly listing fees paid by dealers as well as commission fees from each sale on the platform.
Rolex watches generate “by far” the biggest sales on the platform by transaction value, according to Stracke. Next are Swatch Group AG’s Omega brand, Patek Philippe and Audemars Piguet. The Richemont-owned Cartier brand is the seventh most popular brand by transaction value. Stracke estimates there are more than 400 billion euros worth of luxury watches in circulation worldwide.
Acquired by Stracke and his partners in 2010, Chrono24 now has about 600 employees and is planning expansion into logistics as well as a secondhand watch-buying concierge service for top customers. The firm will also now buy and authenticate watches before selling them on the platform.
Chrono24 is preparing for a potential sale of shares to the public sometime in the future, even though Stracke says the company generates cash and has ample liquidity following several financing rounds. Smaller rival Chronext AG postponed a planned IPO in October, citing unfavorable market conditions.
“A business of our size should always be prepared to go public,” he said. An IPO could come next year, in two or three years, he said, whenever “the timing is right.”
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