MILAN — Let the war of words between Yoox Net-a-porter Group and Farfetch begin.
A day after Net-a-porter founder Natalie Massenet revealed she was joining rival e-tailer Farfetch as nonexecutive chairman — calling it “the future” — YNAP chief executive officer Federico Marchetti hit back.
“I know some brands will jump on Farfetch sooner or later, but there is room for everybody,” he said answering a question on an analysts’ conference call after YNAP reported strong growth in profits and sales for 2016. “Just as there is Bergdorf Goodman for luxury and there is Nordstrom with some brands in both. Frankly, we operate on a different scale, with sales of two billion, 10 times higher, but we appreciate the competition; it keeps us on our toes.”
Marchetti characterized luxury brands as “control freaks that love to control product and pricing.” With Farfetch, they lose control, he contended of the site, which partners with more than 750 designers and fashion retailers selling women’s and men’s wear.
“The industry is moving and there is a huge potential to grow,” he added.
Silvia Scagnelli, corporate development and investor relations director, said: “We believe our business model is best suited for luxury and a sophisticated clientele. It is based on exclusivity and strict control of distribution, story-telling and amazing image. We contribute to seasonal trends and we are close to the product and the retailer. Offering amazing service is a key pillar and brands feel comfortable with us. We control the entire value chain. Farfetch is built on different principles.”
Massenet founded Net-a-porter in 2000 and made a high-profile departure in Sept. 2015 after its majority owner Compagnie Financière Richemont SA merged the company with Yoox Group. She joined Farfetch this month, six months after her year-long non-compete ended.
Marchetti founded Yoox in 2000 as a designer discount site while also operating the web sites for luxury brands. Since the merger, YNAP has continued to add more brands while offering more exclusive collaborations on Net-a-porter and Mr Porter. In addition, Marchetti revealed Wednesday that the launch of a Mr Porter private-label men’s collection is expected this year, as is the debut of a Yoox private-label business.
Last year, the merged YNAP continued on its strong growth path. In the 12 months ended Dec. 31, adjusted net profit climbed 16 percent to 69.3 million euros, or $76.2 million, compared with pro-forma adjusted profits of 59.7 million euros, or $66.2 million, in 2015.
Revenues rose 12.4 percent to 1.87 billion euros, or $2.05 billion, compared with pro-forma sales of 1.66 billion euros, or 1.84 billion, in 2015. Fourth-quarter revenues were up 11.4 percent, accelerating on the first nine months of the year.
“I am satisfied overall, and in the context of numerous external factors,” Marchetti said.
Adjusted earnings before interest, taxes, depreciation and amortization gained 17 percent to 155.7 million euros, or $171.2 million. YNAP chief financial and corporate officer Enrico Cavatorta said he expected a “slight improvement” in EBITDA in 2017. Asked about the impact of exchange rates, he said that, while “premature” today to discuss, he expected it to be “neutral” in the year.
The multibrand in-season business line, which includes Net-a-porter and Mr Porter, registered sales of 968.6 million euros, or $1.06 billion, up 8.4 percent, accounting for 51.8 percent of the group’s sales. Organically, the channel grew 16 percent.
Including Thecorner and Shoescribe, which were discontinued at the end of August and did not contribute to the fourth quarter, this business line grew 5.7 percent.
During the conference call with analysts, the ceo underscored the partnerships with “the most prestigious brands,” with Net-a-porter and Mr Porter signing on Prada and IWC Schaffhausen. Over the course of the year, Tiffany & Co. and Moncler were also added on Net-a-porter, while Ermenegildo Zegna and Giorgio Armani were launched on Mr Porter. Several exclusive capsule collections were introduced, including Gucci for Net-a-porter and Moncler Gamme Bleu. In November, Net-a-porter unveiled exclusive gowns chosen for the Middle Eastern customer from Alexander McQueen and Dolce & Gabbana. In 2016, Mr Porter introduced The Daily, which features original daily style and trend updates, and an Apple TV app. Circulation of Porter, the group’s global print fashion magazine launched in February 2014, reached more than 180,000 copies in 60 countries, with total paid subscriptions 30 percent ahead of the previous year.
After closing the financial year, Net-a-porter added the launch of Alaïa’s ready-to-wear in January, as well as Stella McCartney’s first men’s wear collection on Mr Porter and Tiffany & Co. Fine Watches. The Outnet introduced The Activewear Boutique.
The multibrand, off-season channel, which includes Yoox and The Outnet, was up 16.8 percent to 696.8 million euros, or $766.5 million, accounting for 37.2 percent of the total. Both e-stores expanded their brand offerings. For example, Yoox added Burberry Children and, over the last quarter of the year, the shops-in-shop of Polo Ralph Lauren and Montblanc, as well as Disney’s first online fashion store for designer collaborations. The Outnet added Tom Ford, Fendi and Etro and expanded its private-label offering with the introduction of Iris & Ink’s first footwear collection.
The online flagships, ranging from armani.com to chloe.com, were up 17.1 percent to 205.3 million euros, or $225.8 million, accounting for 11 percent of total.
In the fourth quarter, this channel saw an acceleration, climbing 27.4 percent. Isabel Marant was the headline addition with a five-year global agreement, due to launch in June 2017. Meanwhile, the new online flagship stores of Chloé and Alfred Dunhill were launched in Europe, the U.S. and Asia-Pacific, including China. In addition, A|X Armani Exchange debuted in North America in July 2016, as an extension of the group’s existing global partnership with Armani, which was renewed for a further 10 years until 2025. Other important renewals included Valentino, Marni and Moncler.
Geographically, sales in the U.K. rose 2.3 percent to 269.9 million euros, or $296.9 million. At constant exchange rates, the region was up 15.3 percent. This performance was supported by an improved trend in the final quarter of the year, following softer second and third quarters as a result of Brexit. In the fourth quarter, the U.K. was up 16.6 percent at constant exchange rates and down 1.7 percent at current exchange, penalized by the exchange rate.
North America, the group’s main market, posted sales of 573.9 million euros, or $631.3 million, up 14.1 percent. Asked by one analyst about a possible increase in import duties in the U.S., Scagnelli said “the impact would be massive, not only in luxury but also in the mass market” and the move “would pass costs to customers.” She said she didn’t think it would pass “or not in the current form.” In any case, although it was premature to discuss, she said, the goal was for the company to “be nimble with a flexible structure.”
Italy was up 12.5 percent to 124.8 million euros, or $137.3 million.
In Europe, excluding Italy and the U.K., sales gained 11.1 percent to 488.1 million euros, or $537 million, with strong growth in Russia and continued softer performance in France and Germany.
Asia-Pacific showed 24.8 percent growth to 302.3 million euros, or $332.5 million, mainly driven by China, Hong Kong and Japan.
The Rest of the World region saw revenues climb 6 percent to 111.7 million euros, or $122.8 million, with excellent growth in the Middle East.
In 2016, capital expenditure amounted to 136.9 million euros, or $150.6 million, compared with pro-forma capex of 83.7 million euros or $93 million, in the previous year. Expenses were related to investments in technology and the group’s global techno-logistics platform. In March last year, YNAP signed a long-term strategic partnership with IBM aimed at enhancing its focus on delivering customer-centric innovation and in omnichannel capabilities, while expediting and facilitating the post-merger system integration. Marchetti said he was “very excited about the first next generation omnichannel partnership with one of the most advanced companies in digital. Stay tuned.”
The Net-a-porter warehouse in Hong Kong last year became the group’s distribution center for the Asia-Pacific region (excluding China and Japan). The company also started developing a new in-season hub in Italy, expected to become operational in 2018.
The group and Diesel SpA, controlled by OTB, jointly decided to terminate the agreement for the management of the Diesel online store in late March and refocus the collaboration with Diesel on Yoox.com. diesel.com accounted for about 1 percent YNAP sales last year. YNAP will continue to manage the online flagship stores of OTB brands Maison Margiela, Marni and Just Cavalli until 2020-21. Marchetti said OTB founder Renzo Rosso was a “strategic partner and a long-term shareholder” in YNAP.
YNAP “expects to grow revenues in line with its five-year plan and achieve an improvement in the adjusted EBITDA margin in 2017,” the company said.
The group plans to invest about 160 million to 170 million euros, or $176 million to $187 million, in 2017, primarily in technology.
Also planned are the opening of a new office and distribution center in Dubai, new photo studios and logistics spaces at the Interporto logistics pole in Bologna, Italy, as well as the set-up of the in-season logistics hub in Milan.
As of Dec. 31, the net financial position was positive at 104.7 million euros, or $115.1 million, compared with 62.1 million euros, or $68.3 million, at the end of December 2015, reflecting the capital increase of 100 million euros, or $110 million, subscribed for by Alabbar Enterprises in April 2016, in a venture to develop business in the Middle East.