What does Rolex make from each watch?

[roadster198]

Take the Hulk for example. Does anyone know what an AD buys the watch for?

[Rogdogg]

I'm open to being corrected here but if memory serves me right I believe they buy them for 62% of price making 38% on it.

[JacksonStone]

Originally Posted by roadster198

Take the Hulk for example. Does anyone know what an AD buys the watch for?

Knowing the AD's wholesale only tells us what the AD makes, not what Rolex makes from the watch. I'm not sure if anyone outside the company knows what Rolex's margin is, but I'd be interested to find out.

I concur with Rogdogg that dealer wholesale is 62% of MSRP, but I only "know" that based on what I've read here, so take that for what it's worth.

[Raku]

So basically Rolex sells a £5000 Explorer for £3000, then they will have to pay material costs and tax.
And people around here still think they are expensive.

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[R G]

Originally Posted by Raku

So basically Rolex sells a £5000 Explorer for £3000, then they will have to pay material costs and tax.
And people around here still think they are expensive.

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But they are expensive.

I think you're confusing 'value' with whether something is inexpensive, or expensive.

If a £5 million house is suddenly discounted by 50% to £2.5 million for a quick sale, it's still expensive. Most people can't afford a house of that price. It just represents excellent value for the person that is in the position of being able to buy it.

[RJRJRJ]

As already said, AD pays 62% of MSRP. Absolutely 0% chance you find out what Rolex actually makes.

[tyler1980]

Originally Posted by JacksonStone

Knowing the AD's wholesale only tells us what the AD makes, not what Rolex makes from the watch. I'm not sure if anyone outside the company knows what Rolex's margin is, but I'd be interested to find out.

I concur with Rogdogg that dealer wholesale is 62% of MSRP, but I only "know" that based on what I've read here, so take that for what it's worth.

exactly. Their tax structure also makes it hard to compare vs other brands even if you knew their production costs

they have a competitive advantage just based on tax liability by being organized as a charitable trust. Plus no shareholders to pay out like a publicly traded company means they keep the profit, all of it. Therefore they could make more money per watch in theory vs another company working with the same production costs and wholesale prices/margins.

[padi56]

Well most all movements are made from the same material brass and other metals so movement cost not extremely high.The main cost is the design and tooling up to make hundreds of thousands of units.But today in most all high end products you pay around 70% for the name around 30% for the product.

[Daveclock]

I don't care.....but they won't take my money for a Hulk or BLNR

[Vince KSA]

62% makes perfect sense for what the AD will pay for the watch.

On certain watches, PM etc, but by no means all watches, my AD shows me a table where I get manager's discount which is the 3rd stage of 3 discounts available. Managers discount is at 35%, so I assume this is the minimum ( 62+35=97) 3% profit that they are willing to make on a watch.

Then again 3% on say a WG sub at $36,850 USD is still $1,105 or ,in GBP £28,350 is £850 profit is still not bad, in essence the minimum profit that an AD will accept.

[beshannon]

Originally Posted by roadster198

What does Rolex make from each watch?

More brand equity.

[Zakalwe]

Rolex UK subsidiary made a pre-tax profit of £42m on sales of £330m in 2017.

Edited to add business and finance is a long way from being my area of expertise, but the COGS figure (£260m) might be relevant in trying to guesstimate the amount made per watch, which is presumably impossible to accurately measure without knowing an exact breakdown of what and how many watches they sell.

21% per piece, on average?

[1William]

With no information from the company and the knowledge that AD's pay 62% of msrp for cost, you can speculate on profit. I would think at a minimum that Rolex keystones the cost to the AD's. So if a watch costs 10k retail it costs the AD $6200 and Rolex costs are $3100. I believe that the $3100 number might be high for models that have not been updated for a period of time as the costs of tooling and production will diminish over time once those costs have been spread over a longer time frame.

[brandrea]

My guess is a lot

[Cru Jones]

On each watch, they make much, much more than they cost to make.

[Emreozcan]

Rolex probably making around 500$ while grey dealer makes at least 3000 lol.

[jsausley]

This would vary depending on the model. A basic Datejust or OP, even the Explorer, Rolex doesn't have much money in because all of the R&D has been done for years and their material costs are low. Something with a (more) exotic movement will have a higher production cost, as well as exotic materials such as ceramic and precious metals. Remember that we have been told the failure rate on the BLNR bezel is very high, which means that for every X BLNR bezels that are made, Rolex must destroy Y. This drives that piece's cost up. Another example is that we have been told (by other companies) that developing an in-house chronograph likely costs between $2 million and $5 million in just R&D cost. So the Daytona will have more R&D built up into it.

When it's all said and done, I would imagine you could assume the material costs in a Rolex is maybe a couple hundred dollars for a basic stainless steel watch. Add another few hundred if it has some crazy complications like the YM or Skydweller and obviously the price of any exotic materials (which could be significant for a gold watch, as much as $2,000-$3,000 depending on the model). Next add in your divided R&D cost -- virtually $0 for an OP or Explorer and very little for a Submariner and up to maybe a few thousand for the Skydweller. Then add in a few hours of a well-paid worker's time for assembly, finishing and quality control.

We will never know the true numbers but this should give the sense of how the materials on these watches are cheap, relatively, but the costs of production aren't necessarily as low as you might think.

That being said if we are saying that Rolex sells to an AD at 68% of retail, I would be surprised if Rolex SA had more than 20-25% of retail tied up into a watch. Any more than that and I think it would be challenging to be profitable. That maximum would be about $2,000 for a Submariner and $3,000 for a Daytona (I wouldn't be at all surprised if the true numbers were about half of this).

Where they really make their money is on PM watches, which have maybe $2,000 worth of gold and they can sell for $10,000 more than a stainless model. Keep in mind also that it is easier to machine and polish gold, so they would have far less in tooling maintenance than for the steel models.

[roadster198]

Thanks Jaulsey for the long reply. Some good points in there.

[JayHantz]

What does Rolex make from each watch?

All I know is they usually make us wait a very very long time.

[McMillanTimepieces]

In 2016 Rolex grossed 4.7 billion. That being said they also produce about 750,000 COSO movements per year.
(2,000 a day)


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[77T]

They make...
”The stuff that dreams are made of...”

But the question can’t be answered. Even Rolex doesn’t know the answer to such a broad question. Each model made will have its own GPM. Then there are overheads that cross all models.

At the end of the day, IMHO, each model sold contributes a net-net of 5¢-10¢ on the dollar (I can’t compute in CHF ) after all costs (cash and non-cash) are toted up. So in the parlance of finance, 5-10%...

[klenboy]

Based on their most recent Companies House Financial Statements filing (Rolex UK) their Gross Margin is around 21% (2017). For 2016 it's 18%. It's safe to say based on this trend they may raise the margin up to 25% in the coming years (up to 2020). The only way I can see them raising their margin is by raising their prices. I'm sure they have their costs managed well and locked in; won't get much of their margin through cost savings (this will most likely sacrifice production quality and will be detrimental to the brand).

Source: https://beta.companieshouse.gov.uk/c...filing-history

This I believe is the best picture we have available. Their next filing for 2018 is October I believe so it's a ways away.

If we have any C.A.'s here would like to know your input.

[jeffnnj]

About $3.50

[EDL7]

It's probably 10x's to 20 x's profit..
With most $$ spent on marketing..
Figure a 5K watch wholesale..cost them a couple hundred..or a little more..maybe..

[Solo118]

Let's put it this way, we would all wish to have the profit margin that Rolex has!

[Dsmith1974]

On a SS ref for 6K (based on what I’ve read on here before) my understanding is 2K for Rolex to make (inc design, marketing, staff, foundaries, etc), 2K profit for Rolex and 2K profit for the AD.

The materials alone are probably quite cheap similar to a meal in a restaurant. The margins will increase significantly for PM.

[amh]

Originally Posted by EDL7

It's probably 10x's to 20 x's profit..
With most $$ spent on marketing..
Figure a 5K watch wholesale..cost them a couple hundred..or a little more..maybe..

That's what I figure as well, for a SS model.

Why?
- The SS case/bracelet costs very little in materials, it's mostly the manufacturing
- Assembly likely mostly automated
- The movement likely $50-100

Your cell phone probably cost more to make than a Rolex.

[77T]

Originally Posted by klenboy

Based on their most recent Companies House Financial Statements filing (Rolex UK) their Gross Margin is around 21% (2017). For 2016 it's 18%. It's safe to say based on this trend they may raise the margin up to 25% in the coming years (up to 2020). The only way I can see them raising their margin is by raising their prices. I'm sure they have their costs managed well and locked in; won't get much of their margin through cost savings (this will most likely sacrifice production quality and will be detrimental to the brand).

Source: https://beta.companieshouse.gov.uk/c...filing-history

This I believe is the best picture we have available. Their next filing for 2018 is October I believe so it's a ways away.

If we have any C.A.'s here would like to know your input.

Let’s take that GPM at face value.
Now as a Foundation they have no tax in Switzerland? I don’t know.

But they do have a lot to take away from the gross margin to get to net, and then to earnings.

That’s why I say 5-10% net earnings.


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[P1nky_Up]

Originally Posted by Vince KSA

62% makes perfect sense for what the AD will pay for the watch.

On certain watches, PM etc, but by no means all watches, my AD shows me a table where I get manager's discount which is the 3rd stage of 3 discounts available. Managers discount is at 35%, so I assume this is the minimum ( 62+35=97) 3% profit that they are willing to make on a watch.

Then again 3% on say a WG sub at $36,850 USD is still $1,105 or ,in GBP £28,350 is £850 profit is still not bad, in essence the minimum profit that an AD will accept.

If the AD that had the full gold Rootbeer offered me anything even close to that I would have bought it in a second. Only offered me 2% off.

[Vince KSA]

I did say by no means all watches or models. The newer models are never offered with discount but full gold Subs, GMTs, YMII are offered with manager's discount. Other TT models with a sizable discount too.

As you allude to, something like the CHNR is a new model so no chance.