Richemont, which also announced robust gains in first half sales and profits on Friday, said “further progress” has been made with Farfetch towards creating a neutral, industry-wide platform, built on the latest omnichannel retail technologies, to support the digitization of the luxury industry.
Richemont shares were up 9.25 percent to 134 Swiss francs in morning trading on Friday.
It has long been an ambition of Richemont’s owner and founder Johann Rupert to create a neutral selling platform, although few of his industry competitors initially responded to his call. These talks appear to move Rupert closer to realizing his early ambition.
During a call following the announcement Rupert made clear that he has been waiting for this moment for the past six years. “The goal is not the de-consolidation of YNAP, but to get back to what we first wanted to do in 2015 when I invited industry competitors to join us in establishing a joint platform,” because no single player was strong enough to do it on their own, he said.
When U.S. markets opened on Friday, Farfetch confirmed it was in discussions with Richemont “in relation to a potential expansion of their existing Luxury New Retail strategic partnership,” adding that the parties were discussing a number of possible options.
While Rupert and his managers declined to comment on specific shareholders and their stakes, Rupert made clear that the ongoing discussions with Farfetch were not the result of “activist pressure at all,” and talks about creating a neutral, pan-industry platform have been ongoing for at least two years.
Richemont said the scope of the discussion involves Farfetch investing directly in YNAP as a minority shareholder, with other investors to be invited to participate alongside; YNAP leveraging Farfetch Platform Solutions to support its ongoing transition to a hybrid business model; the Richemont brands leveraging Farfetch technology to accelerate their online retail developments; and Richemont brands joining the Farfetch marketplace.
The marriage of the two online platforms is also something that financial analysts have been agitating for as YNAP has been a loss leader at Richemont, and some investors want to see it spun off, sold or merged with another company.
“Other industry players and investors have already indicated their interest in investing in YNAP alongside Richemont and Farfetch. The ultimate objective is for YNAP to be a neutral platform, with no controlling shareholders,” the Richemont statement said Friday.
The partnership forged a year ago involved Richemont, Farfetch, Alibaba and Artemis, which is owned by the Pinault family.
Richemont said it continues to work with Farfetch “towards definitive agreements, and will provide an update in due course, if and when appropriate.”
The company said there can be no certainty that the discussions will lead to definitive agreements, nor as to the timing or terms of any transaction. Any transaction would be subject to the receipt of clearances from relevant anti-trust authorities.
Earlier on Friday Richemont reported a strong set of first half results, revealing the pent-up demand for luxury watches and jewelry during the pandemic.
Sales at the parent of brands including Cartier, Van Cleef & Arpels, IWC, Panerai and Chloè rose 63 percent to 8.91 billion euros compared with the corresponding period last year, and 20 percent on the same period in 2019.
Profit rose to 1.25 billion euros – eight-fold compared with 2020 – and 44 percent compared with 2019. Richemont said it saw triple-digit growth in the Americas region and double-digit growth in other regions.
The company attributed the increases to a “customer-centric” and digital approach and Rupert noted in his statement that direct sales to customers in the period accounted for 74 percent of group sales in the six months.
Jewelry was a top performer, notching a 67 percent rise in sales to 5.10 billion euros in the period. The watch division, which Richemont had restructured pre-COVID, grew 74 percent to 1.68 billion euros, with direct sales to clients approaching 50 percent. Rupert said “every watch Maison participated in this notable improvement.”
Richemont said its online platforms – YNAP and Watchfinder – recorded higher sales and a stable EBITDA loss as Net-a-porter, Mr Porter, The Outnet and Watchfinder in particular faced new, temporary absorption of Brexit-related custom duties and VAT “while intensifying their outreach and communication efforts.”
Rupert noted that Richemont is learning from its partnership with Alibaba, which it forged in October of 2018. The partnership was initially meant to promote the Net-a-porter and Mr Porter in the region – and to the traveling Chinese consumer – and has since expanded to include partners Artemis and Farfetch.
“Working closely with Alibaba, our teams gained a better understanding of their approach to digital marketing in China, including ‘shoppertainment,’ and of their operating model centered around a network of Tmall partners. Along with Alibaba, we each acquired 12.5 percent of the share capital and voting rights of Farfetch China Holdings Limited,” Rupert said.
Ambitious – but also cautious – Rupert noted in the statement that the post-COVID world “is yet to emerge. For the second half of the year, volatility is likely to persist, including in terms of inflation and geopolitical tensions.”
He noted that Richemont will also face challenging comparatives in the second half, and going forward.
“We look to the remainder of the year with vigilance and cautious optimism: the appeal and enduring nature of our distinctive and highly qualitative creations resonates well with the values and expectations of our discerning clientele,” he said.