Luxury brands conglomerate Richemont has kicked its costly online retailing ambitions further down the road.
And what a bumpy information superhighway it’s been for the owner of some of the best-known luxury brands, including Cartier, Montblanc, Vacheron Constantin and Van Cleef & Arpels. In fact, the Rupert family, the controlling shareholder at Richemont, must rue the day the group pitched its first investment into online luxury goods retailer Net-a-Porter almost 15 years ago.
The deal might, initially, have held merit on paper, spurring online marketing of Richemont’s coveted jewellery, watch and fashion brands, as well as creating a sprawling independent platform for luxury goods sales. The latter — a proverbial Amazon for luxury brands — would always be a bit difficult to peddle, with Richemont the commanding shareholder.
With Net-a-Porter suffering a few periods of disconcerting underdelivery, a decision was made to bulk up through a merger with another top-end online retailer, Yoox, in early 2015. New-look Yoox Net-a-Porter (YNAP) — in which Richemont retained a commanding shareholding — initially looked to have quite an imposing online presence. But again profitable traction proved elusive.
Two years ago Richemont offered what appeared to be an elegant solution: proposing to sell its 47.5% stake in YNAP to then fast-growing online retailer Farfetch. The deal would have let Richemont retain a significant minority stake in the enlarged business. But then Farfetch unfortunately hit the skids, and the deal was called off.
The group will retain a rather significant 33% stake in the merged entity
The latest proposal sees Richemont continuing its habit of ushering YNAP towards another online retailer — this time the saintly sounding Mytheresa. While more than a few pundits might have preferred Richemont to make a clean break with its online endeavours, the group will retain a rather significant 33% stake in the merged entity. Richemont will also need to provide a not insubstantial revolving credit facility of €100m — despite handing over a business with no financial debt and €555m in cash to Mytheresa.
Richemont reckons the transaction creates a multibrand digital group of significant scale and global reach as well as exceptional customer centricity. The group might easily have said the same thing at the time of the Yoox/Net-a-Porter plan and the proposed transaction with Farfetch. With hindsight, we know niche online retailing can be a tough gig.
Interestingly, Richemont’s one-third shareholding in Mytheresa is subject to a one-year lock-up clause, which is then followed by a further year during which “only certain limited sale transactions may take place”. For the moment, then, Richemont shareholders will probably fixate on the statement that “Richemont currently expects the writedown of YNAP net assets to amount to approximately €1.3bn”.
An honourable online outcome — at least in the medium term — will depend on movements in the share price of Mytheresa’s parent company. After peaking at $34.50 in early 2021 (just after an IPO), the MYTE share price has dribbled down to less than a fifth of that high. The share did appear to bottom late last year at $2.45, and has increased 100% in the year to date. Some heart can also be taken from the 55% perk-up following the announcement of the YNAP acquisition.
In truth, it’s all relatively small fry for Richemont, which recently reported a net cash pile of €7.3bn at the end of June. However, sorting out the YNAP legacy is symbolically important for a group that arguably might have done better by just sticking to its core jewellery and watchmaking maisons.
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