Luxury e-commerce specialist Farfetch gains on investment in Cartier jewelry maker’s platform
Richemont 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.
The maker of Cartier jewelry 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.
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 deal comes amid a flurry of industry-wide investments in digital services as luxury players shrug off past skepticism and embrace new channels to reach customers, spurred by a faster shift to online consumption during the pandemic.
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 towards 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.