Richemont separates from Yoox Net-A-Porter to better face the competition

Finally! The news was long awaited, but it didn’t fall until Wednesday. Richemont, one of the leading Swiss luxury brands with a portfolio of 18 brands including Cartier, Jaeger-LeCoultre, Montblanc and Van Cleef & Arpels, has reached an agreement with Farfetch to acquire 47.5% of Richemont’s shares Yoox Net-A-Porter (YNAP).

Under the terms of this agreement, Farfetch, the London unicorn founded in 2008 by Portuguese entrepreneur José Neves, will lead the fortunes of an online retail platform for discontinued fashion and luxury clothing, unsold and pre-owned, that leverages the strengths of Farfetch and YNAP. The latter, 100% controlled by Richemont since 2015, was born from the merger of the young London company Net-A-Porter, founded by the American-born fashion journalist Natalie Massenet, and Yoox, run by the Italian Federico Marchetti, General Manager , Founded by YNAP until July 2021. By opting out from YNAP, Richemont emerges from a costly adventure at full price, but without turning away from the development of online sales channels.

Also read: Target of an activist fund, Richemont is not wavering

Anyway, good news

“If we look at the past, it is clear that this operation is very costly as it causes a depreciation of 2.7 billion francs, not counting the hundreds of millions that Richemont has invested in recent years,” explains Jean -Philippe Bertschy, consumer goods analyst at Vontobel. On the other hand, if we look to the future, it’s a real relief for the group, which can invest its capital in the businesses it is better at, particularly its gems. ”

The English Farfetch website, set to become a benchmark for the online sale of luxury clothing in a few years’ time, has in fact committed to buying up Richemont’s stake in two stages: 47.5% initially against payment in shares, and the rest in a second stage through the exercise of a call – and put options Conditions for achieving profitability targets and approval by competition authorities.

Also read: Richemont’s sales rose in the first quarter despite zero Covid in China

“It is very likely that Farfetch will take over the majority of YNAP in the coming years,” assures Jean-Paul Bertschy. This retirement after five years would guarantee Richemont a presence on the board of directors (three seats) of Farfetch, which in the meantime is determined to consolidate its position as a leader in online luxury by adding Richemont’s catalog to its multinational -Brand offer that includes in particular chanels, and multichannel.

Adding around 5.3 million YNAP customers would make this possible Farfetch not only aims to grow its gross value of goods, or total value of orders processed – which was $4.2 billion in 2021, up 33% from 2020 and 98% from 2019, but also its geographic coverage, YNAP is present in around 190 countries. According to José Neves, the integration of YNAP will increase the productivity of the new profitable company from day one.

Free horizon for a healthy reorientation

For Jean-Philippe Bertschy, this transaction, which the shareholders of the Richemont group, their managers and the markets had hoped for, went all the better as takeover bids from peers were hesitant and the takeover of the New York jeweler Tiffany by the French giant LVMH had the increased competitive pressure.

The impact of the operation on Richemont’s accounts will result in a leaner balance sheet, better productivity and regained scope to invest in the group’s gems. The pressure is also falling on South African Johann Rupert, who heads the group and holds 10% of the shares (51% of the voting rights). Markets welcomed the operation, with Compagnie Financière Richemont’s price up 3.55% during the August 24 session.

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