Online High Fashion Retailers Net-A-Porter And Yoox To Merge

Net-A-Porter website

Richemont said Tuesday that it has entered into a binding, conditional agreement to merge the operations of its subsidiary, The Net-A-Porter Group, with Yoox S.p.A. in an all-share transaction.

The agreement is conditional upon the approval of Yoox shareholders at a meeting expected to be held in June. Upon completion of the transaction, the combined entity will be renamed “Yoox Net-A-Porter Group.” It will be incorporated in Italy and listed on the Milan stock exchange. Natalie Massenet, founder and executive chairman of The Net-A-Porter Group, will serve as executive chairman and Federico Marchetti, founder and CEO of Yoox Group, will be CEO of the combined entity.

The combined company is reportedly expected to be valued at more than $2.5 billion.

Richemont said Monday in a statement that it will receive 50 percent of the share capital of the combined company. Its voting rights will be limited to 25 percent. Richemont said it is committed to a lock-up period of three years in respect of shares equivalent to 25 percent of the total share capital of the combined entity. Upon completion, Richemont will appoint two representatives to the combined company board of directors that will have a minimum of 12 members. 

The combined company is expected to have a capitalization of up to 200 million euro ($214.4 million) to fund growth, Richemont said.

Richemont was a minority shareholder of Net-A-Porter in its infancy and became a controlling shareholder in 2010.

“We are proud of Net-A-Porter’s achievements under the leadership of Natalie Massenet, ably assisted by a wonderful team of professionals,” Johann Rupert, Richemont chairman, said in a statement. “Established business models are being increasingly disrupted by the technological giants. It is with this in mind that we believe it is important to increase leadership and size to protect the uniqueness of the luxury industry. The merger of the two leaders will further enhance an independent, neutral platform for a sophisticated clientele looking for luxury brands.”

Yoox is a multi-brand online fashion store launched in 2000 with operations in China, Europe, the U.S. China and Hong Kong. It is listed on the Milan stock exchange. It specializes in selling off-season luxury goods online in its own stores, as well as trendier brands on thecorner.com, and operates the online stores for more than 30 other luxury brands.

In 2012, Yoox partnered with luxury and fashion holding group, Kering, a rival of Richemont, managing the online stores of several luxury brands owned by Kering, including Saint Laurent, Bottega Veneta and Stella McCartney. 

Net-a-Porter has offices in London, New York, Hong Kong and Shanghai. Net-a-Porter’s website sells clothing, jewelry, shoes and other accessories from a variety of top designers and labels, including Alexander McQueen, Dolce & Gabbana and Valentino. It also publishes the magazine Porter, which allows readers to buy featured items.

The transaction, expected to be completed in September 2015, will generate a one-off, non-cash, accounting gain in of approximately 317 million euro for Richemont. 

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Richemont Reports Record Jewelry and Watch Sales

Cie. Financiere Richemont SA reported Thursday that sales for its fiscal year increased 33 percent to nearly 6.9 billion euros ($9.84 billion). Operating profit for the year, ended March 31, increased 63 percent to 1.35 billion euros. ($1.92 billion).

The Geneva-based luxury goods company reported strong sales across all segments and regions. Among the big winners for the year were jewelry and watch sales.

Richemont’s jewelry “masions,” Cartier and Van Cleef & Arpels, reported a 29 percent increase in sales to a record 3.48 billion euros ($4.9 billion), based on broad-based popularity in terms of geography and product lines. Brand owned boutiques did particularly well.

Its watch properties ( Vacheron Constantin, Baume & Mercier, Jaeger-LeCoultre, Lange & Söhne, Officine Panerai, IWC, Piaget, and Roger Dubuis), reported a 31 percent sales increase for the year to a record 1.77 billion euros ($2.52 billion), with all specialist watchmakers performing well, with the expected exception of, Baume & Mercier, which is undergoing restructuring. Operating margin increased to 21.4 percent of sales, in spite of higher costs of sales due to the appreciation of the Swiss franc and higher precious material prices.
(sales by region, outlook and CEO quotes after jump)

“We are pleased to report that Richemont has met the challenging environment of the past year by achieving strong sales growth across all segments and all geographic regions,” said Johann Rupert, Richemont executive chairman and CEO. “The year under review has seen record sales and profits for our jewelry maisons and specialist watchmakers, despite the stronger Swiss franc.… Net-A-Porter.com, which was acquired in April 2010, is performing ahead of its business plan.”

The company’s retail sales exceeded 50 percent of its overall sale for the first time because it was also the first time online luxury goods retailer, Net-A-Porter.com, was included with total sales. Excluding the e-commerce business, sales increased by 24 percent for the year. Group-owned boutiques increased to 876 boutiques with store openings primarily in growth markets, such as the Asia-Pacific region.

The Group’s wholesale business, including sales to franchise partners, grew despite being negatively impacted by the de-stocking by business partners, planned reduction in the number of points of sale in some key markets, most notably in the United States, and constraints in the supply of finished products.

Sales by Region
Sales in Europe, which account for 38 percent of total group sales, increased by 23 percent to 2.58 billion euros ($3.67 billion), reflecting purchases made by local clients and tourists and the integration of Net-A-Porter.com, to its retail sales mix.

The Asia-Pacific region now accounts for 37 percent of total group sales due to expansion by the company’s brands to take advantage of the increased wealth in the region. Sales for the year increased 36 percent to 2.57 billion euros ($3.66 billion).

Sales in the Americas, which account for 14 percent of group sales, increased 40 percent to 998 million euros. The company says that this strength in sales reflects both weak comparative sales, the integration of Net-A-Porter.com, and positive exchange rates. However, growth in the region also stems from a strong retail performance and higher levels of productivity in its wholesale network. The reported growth has occurred despite the reduction in the number of points of sale in the region.

Japan, which accounts for about 11 percent of group sales, reported an 18 percent increase in sales to 737 million euros ($1.05 billion), largely due to the significant appreciation of the yen. Yen-denominated sales increased by 1 percent, reflecting positive responses to new products and a stabilization of the Maisons’ businesses. The earthquake and tsunami of March 11 and the aftermath occurred shortly before the group’s financial year-end and consequently had only a minimal impact on the group’s performance.

In its outlook, Rupert said sales in the month of April were 32 percent above the comparative period, or 35 percent at constant exchange rates.

“In an environment currently marked by geopolitical unrest and currency instability, we hope that this positive trend will be confirmed in the coming months,” he said, adding that capital investment in its companies over the next two years will run from 6 percent to 8 percent of total sales.

Report: Tiffany May Be Ripe for Acquisition

Tiffany & Co. flagship store

Tiffany & Co. has sparkled as the world slowly recovers from one of the worst economic downturns ever. Just today, the luxury jewelry retailer said its holiday net sales grew 11 percent, over the prior year, and that it has increased its global sales outlook to $3.1 billion, well above the $2.7 billion in sales it earned in 2009.

All this success has made the New York-based company ripe for acquisition, according to a Paris-based hedge fund manager.

Bernheim, Drefus & Co. said Tuesday that Tiffany could be the subject of a takeover bid by a luxury conglomerate in 2011, the UK jewelry trade publication Professional Jeweller reports. The most likely suitors are Richemont, Swatch Group and LVMH.

“2010 has been a splendid year for Tiffany with a surge in both sales and stock price and with a great outlook and a consolidating market there is still plenty of room for a continuing growth in the stock,” the company reportedly said.

The hedge fund also said that being a part of a conglomerate would allow Tiffany to “to increase its footprint and have a stronger position towards its stakeholders.”