LONDON — Brexit? Bring it on.
Undaunted by Britain’s future exit from the European Union — and the uncertainty around new trade deals and import tariffs — Milan and London-based Yoox Net-a-porter Group is bullish about the future.
Federico Marchetti, chief executive officer, immediately addressed the Brexit referendum as he laid out growth projections for 2020 during a capital markets day at the Mandarin Oriental in Knightsbridge.
“We were surprised, but we were not taken by surprise,” said Marchetti of the referendum, adding that YNAP’s 2020 revenue projection of up to 4.1 billion euros, or $4.54 billion, takes into account the impact of the weaker sterling and any difficulties relating to the movement of goods.
“We are strongly confident that we have the best business model and the best team in place to make our plan happen,” he said. YNAP is planning to outstrip market growth, with revenue set to increase 17 to 20 percent compared with 15 percent growth expected in the online personal luxury goods market. YNAP is also expecting its market share to grow from the current 10 percent to 11 to 12 percent by 2020.
In four years’ time, revenues are set to total somewhere between 3.7 billion euros, or $4.10 billion, and 4.1 billion euros at constant exchange, driven by a variety of factors including increased mobile phone shopping; the rollout of hard luxury brands on Net-a-porter and Mr Porter, and the expansion of private label collections on Mr Porter and Yoox.com.
YNAP stock was down 1 percent to 19.89 euros, or $22, in midday trading on the Milan bourse. All figures have been converted from the euro at current exchange.
Private label — including The Outnet’s Iris & Ink collection — is set account for 10 percent of the off-season business by 2020. Mr P, the men’s private label business, will launch on Mr Porter next year, while the name of the Yoox private label business has yet to be announced.
Marchetti and his team also touted YNAP’s “omni-stock” global logistics network that will be built around central hubs and regional distribution centers. It will be fully operational by 2018.
That new program will provide global visibility of stock for all three of YNAP’s business channels: in-season, off-season and online flagship stores. In-season is the largest business, with 54 percent of revenue, followed by off-season with 36 percent, and stand-alone stores with 10 percent.
Regarding Brexit, both Marchetti and Enrico Cavatorta, chief financial and corporate officer, said the weaker pound will have a slightly positive impact on the company’s bottom line, although it will dilute net revenue growth.
Marchetti said the international tech muscle that YNAP is building should offset any regional disruption in Britain. The company said it has “well-balanced GBP-denominated costs and revenues.”
“Through the omni-stock program, we are hedging the risk related to single countries. The product will basically be allocated intelligently through the use of smart data, and we expect our logistic setup to be very well-balanced after Brexit,” Marchetti said.
“In terms of offices and people, we expect to hire a couple of hundred people in London and are expanding our offices here. All in all we believe in this market and in London and we’ll continue to grow here.”
Asked about the impact of future import tariffs — Britain’s new prime minister will have to negotiate new trade deals with the European Union over the next two years — Cavatorta added that any impact would be small.
“Let’s say there are import duties. As of 2018, thanks to the omni-stock program, a large part of the stock that’s now sitting in the U.K. will sit in Italy. In the U.K., there will be inventory that will serve the U.K. market.
“The cost of goods sold globally that will be affected by U.K. import duty will be less than 10 percent. We don’t expect any significant impact,” Cavatorta said, adding that, in terms of prices, the company would follow recommended retail pricing.
Cavatorta added that he does not expect Brexit to disrupt the movement of employees or hiring and that “cultural cross-fertilization” remained important to the company across countries and continents.
The U.S. remains YNAP’s largest market, accounting for about one-third of overall revenue. The company said there is much room for growth in China and Japan, and it’s eager to make inroads in the Middle East following a new investment earlier this year from Alabbar Enterprises.
Mohamed Alabbar is the founder and chairman of Emaar Properties, parent company of Emaar Malls Group, the owner and operator of shopping malls and retail businesses in Dubai, including The Dubai Mall.
Marchetti also said that mobile would be the beating heart of future growth. He believes that Millennials “who have mobiles in their hands and on their minds” will account for the bulk of luxury goods sales by 2020. YNAP said it is seeing mobile sales grow 0.5 percent month-on-month.
Meanwhile, the introduction of hard luxury brands onto the Mr Porter and Net-a-porter sites is set to generate 100 million euros, or $111 million, in sales by 2020. Last year, Net-a-porter partnered with Chanel for a fine-jewelry pop up, and has inked longer-term deals with Pomellato and Tiffany & Co.