The logo of the luxury goods company Richemont is pictured at its headquarters in Bellevue near Geneva, Switzerland, June 2, 2022. REUTERS/Denis Balibouse
ZURICH, Aug 24 (Reuters) – Richemont (CFR.S) Wednesday announced a long-awaited deal to offload most of its online fashion retailer YOOX Net-A-Porter (YNAP), clearing the way for its labels to sign up for technology run by luxury e-commerce specialist Farfetch (FTCH.N).
The deal, removing from its books a loss-making business that had become a distraction for the Swiss luxury group, was welcomed by analysts and Richemont shares were up 3.6% in afternoon trading.
The maker of Cartier jewellery and IWC watches said it expected a 2.7 billion euro ($2.68 billion) writedown related to the agreement in which Farfetch will initially acquire a 47.5% stake, in exchange for over 50 million Farfetch shares. The estimated write-down could fluctuate, depending on the listed price of Farfetch shares and exchange rates, Richemont added.
Dubai Mall developer Mohamed Alabbar, will obtain a 3.2% stake through his investment vehicle Symphony Global.
The deal follows months of negotiations that were complicated by the e-commerce sector's retreat from pandemic highs as consumers returned to physical stores. Farfetch shares lost 60% over the past six months, and it missed first quarter sales expectations due to business disruptions from lockdowns in China as well as a loss of sales in Russia.
"This seems very good news for both companies," said Bernstein analyst Luca Solca.
While Richemont will remove a "continuing source of losses", Farfetch will get a welcome boost to traffic from e-concession deals with Richemont labels, he said.
The agreement also laid the path, through a put and call option mechanism, towards Farfetch potentially acquiring the remaining shares in YNAP.
The deal comes amid a flurry of industry-wide investments in digital services as luxury players shrug off past scepticism and embrace new channels to reach customers, spurred by a faster shift to online consumption during the pandemic.
Richemont flagged in November its talks with Farfetch about selling a minority stake in YNAP and plans to get other investors on board. The goal was to create a neutral platform powered by Farfetch's best-in-class technology, with various luxury labels involved, but no controlling shareholder. read more
Majority ownership had become an issue, some analysts had suggested, noting rival luxury brands were likely reluctant to share data with a competitor.
In a call with journalists on Wednesday, Farfetch and Richemont executives stressed their aim to make YNAP a "neutral and open platform" for the industry.
Despite heavy investments in YNAP over the years, Richemont's online distributors, including watch marketplace Watchfinder, still had an operating loss of 210 million euros in the fiscal year to March.
It had begun moving toward a more inventory-light "hybrid" business model, Farfetch, meanwhile, operates as a marketplace without inventory, making money by connecting buyers with brands and charging commissions.
Richemont had become familiar with Farfetch's approach investing alongside Alibaba Group (9988.HK) in a Farfetch marketplace in China in 2020.
Pressure from investors has been mounting on Richemont to exit its ecommerce division, including from long time shareholders Artisan Partners (APAM.N), and more recently, Bluebell Capital Partners. read more
($1 = 1.0062 euros)
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