Richemont to sell stake in online retailer to Farfetch, takes 2.7 billion euros in impairment

The logo of luxury goods company Richemont is pictured at its headquarters in Bellevue near Geneva, Switzerland, June 2, 2022. REUTERS/Denis Balibouse

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ZURICH, Aug 24 (Reuters) – Richemont (CFR.S) on Wednesday announced a long-awaited deal to offload most of its online fashion retailer YOOX Net-A-Porter (YNAP), paving the way for membership from its labels to technology run by luxury e-commerce specialist Farfetch (FTCH.N).

The operation, removing from its books a loss-making activity that has become a distraction for the Swiss luxury group, was well received by analysts and Richemont shares rose 2.2% in morning trading.

Jewelry maker Cartier and watchmaker IWC said it expects a 2.7 billion euro ($2.68 billion) writedown related to the deal in which Farfetch will initially acquire a 47-year stake. .5%, in exchange for more than 50 million Farfetch shares. The estimated depreciation could fluctuate depending on the quoted price of Farfetch shares and exchange rates, Richemont added.

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Dubai Mall developer Mohamed Alabbar will buy 3.2% through his investment vehicle Symphony Global.

The deal follows months of negotiations that were complicated by the e-commerce sector pulling back from pandemic highs as consumers returned to physical stores. Shares of Farfetch have fallen 60% in the past six months and have missed sales expectations in the first quarter due to trade disruptions from shutdowns in China as well as a loss of sales in Russia.

“This seems like very good news for both companies,” Bernstein analyst Luca Solca said.

While Richemont will remove a “continuing source of losses”, Farfetch will benefit from a welcome increase in traffic through online franchise agreements with Richemont’s labels, he said.

The agreement between Richemont, Farfetch and Symphony Global also paved the way, through a put and call option mechanism, for Farfetch’s potential acquisition of the remaining shares of YNAP.

The deal comes amid a wave of industry-wide investment in digital services as luxury players shrug off past skepticism and embrace new channels to reach customers, spurred by a more fast to online consumption during the pandemic.

“Finally, great news for Richemont. The deal ends years of underperformance and heavy investment in YNAP,” Vontobel analyst Jean-Philippe Bertschy wrote in a note, recommending the stock as “purchase”.

Richemont said in November it was in talks with Farfetch about selling a minority stake in YNAP and said it was trying to bring in other investors. Read more

Richemont has invested heavily in YNAP over the years, but its online distributors, which also include watch marketplace Watchfinder, still posted an operating loss of 210 million euros in the year ended March. .

($1 = 1.0062 euros)

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Reporting by Silke Koltrowitz and Mimosa Spencer; Editing by Edmund Blair and Tomasz Janowski

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