Richemont exits online hell, but heaven is way off
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Karen Kwok
LONDON, Oct 9 (Reuters Breakingviews) -Johann Rupert has finally found a way to cut his losses. The Richemont CFR.S boss on Monday said he was selling online luxury platform Yoox Net-A-Porter (YNAP) to German player Mytheresa, in exchange for a 33% stake in the buyer. That solves the Cartier maker’s immediate problem, but it still has to contend with online luxury’s wider headaches.
YNAP has been a mess for Rupert and his fellow shareholders, who have spent billions of dollars on YNAP over the last decade. In the year to March 2024, annual sales fell 14% and the e-commerce platform made a 1.5 billion euro net loss. In 2022, Richemont failed to sell YNAP to U.S.-listed Farfetch, which itself struggled to avert insolvency and ended up being sold to Korean e-commerce group Coupang CPNG.N.
Monday’s deal reflects the seller’s weak bargaining position. Richemont is handing over YNAP with 555 million euros of cash, while promising an extra 100 million euros of credit in the next six years. The 33% stake in Mytheresa Richemont is getting in return is only worth around $200 million even after accounting for a jump in the buyer’s shares since the deal.
Holding a stake in a healthier entity gives Rupert at least a theoretical chance to recoup some of his outlay. For Mytheresa, the deal promises added revenue and customers – together the enlarged group would have 3 billion euros of products sold on its platform, up from the 982 million euros analysts expect it to get this year, according to data polled by Visible Alpha. But the ropey economics of the online luxury sector remains a problem.
Luxury giants like LVMH LVMH.PA and Kering PRTP.PA have seen sales growth slow or go into reverse in recent years, but at least they can benefit from rich buyers’ preference for spending cash in store. Compared to the 18% EBITDA margin sported by other e-commerce players like e.l.f Beauty, luxury has a specific headache when it comes to online. Mytheresa’s own adjusted EBITDA margin is a measly 7%, not least because luxury e-commerce players need to provide various add-ons like style advisors to cater to higher-end customer tastes.
The problem for Rupert is that even after the deal Mytheresa reckons its adjusted EBITDA margin rises to only 8% in the medium term. Consultancy Bain & Co data showed online sales of luxury goods dropped between 2022 and 2023, and won’t gain any traction until 2030. Rupert may have got rid of something that was burning a hole in his pocket, but it’s pushing it to assume Mytheresa – or online luxury as a whole – is getting anywhere fast.
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CONTEXT NEWS
Cartier owner Richemont on Oct. 7 said it has agreed to sell its Yoox Net-A-Porter online fashion and accessories business to German luxury fashion platform Mytheresa.
Richemont will take a 33% stake in Mytheresa in exchange for 100% of the share capital of YNAP, the Swiss group said.
Mytheresa will get YNAP's 555 million euro ($608.50 million) cash pile without any financial debt, as well as a revolving credit facility of 100 million euros from Richemont.
Richemont will write down approximately 1.3 billion euros, including the cash left in YNAP, which sells clothes, bags, accessories and jewellery, in its first-half results due to be published on Nov. 8.
Depository receipts of New York-listed Mytheresa rose 57% to $6.76 on Oct. 7. As of Oct. 9 they were at $7.75.
Mytheresa's market value has plummeted since its IPO https://reut.rs/3U3lIoN
Editing by George Hay and Streisand Neto
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