LONDON — What’s next for Net-a-porter?
That was the question almost everyone was asking Thursday following the news that Natalie Massenet had resigned as executive chairman of Net-a-porter Group in advance of its merger with Yoox Group. The Italian online retailer’s shares shot up Thursday following the news — but the departure of Net’s founder and guiding light is likely to mean it will evolve into a very different company.
Industry observers are speculating on what Massenet’s departure will mean for the firm’s luxury culture, along with whether the editorial products she introduced to enhance the shopping experience will survive her exit.
Carmen Busquets, the original investor in Net-a-porter who worked with Massenet to launch the company, said Thursday that the American executive was “the driving force” behind the company. “Don’t get me wrong, her team is extraordinary…but she was the visionary and she had the key relationships. How are the designers that are the lifeblood of [Net] going to react to her leaving?” Busquets questioned. “I can’t imagine they will be pleased.”
Of the opinion that Yoox is a “discounter,” Busquets added: “I fear others will likely leave following her departure so it is very likely [Net] will be a much weaker company once it is merged. The two cultures are so different, and I have consistently said mergers are not made on paper, they are made by a matching of cultures and these two cultures could not be more different.”
In a research note Thursday, analysts at Intermonte indicated that one explanation behind Massenet’s exit is the fact that Federico Marchetti, founder and ceo of Yoox, would have largely had “operative control of the new group,” in his role as ceo of the Net-a-porter Yoox Group, undoubtedly changing the shape of the company. “The news is marginally negative as it could suggest the risk that other talents may decide not to continue their collaboration after the merger,” Intermonte’s analysts wrote. “Another risk, more limited we believe, could be represented by Massenet herself, if she decides to begin new activities in the sector in the future.”
According to industry sources, staff at Porter, the upscale glossy magazine that Net-a-porter launched with much fanfare in 2014, are already wary of the future of the title under the new Net-a-porter Yoox Group. They are said to already have put out calls to explore options at other companies Thursday, following Massenet’s departure. According to sources, their belief is that Yoox “doesn’t value print to the same degree as Net-a-porter.”
However, another industry source said that while speculation about the future at the soon-to-be-merged entity is “inevitable,” Porter is seen as one of Net-a-porter’s “key assets.” The magazine has been growing its circulation, the source noted, adding that Marchetti is said to “admire” the title.
Brian Buchwald, ceo of consumer intelligence company Bomoda, with offices in New York and Shanghai, noted that “the most difficult transition for a company is when it loses its founder. Net-a-porter’s DNA and culture were Natalie and by losing her it will be a significant challenge to keep Net-a-porter the same.”
Defining Massenet as an “artist,” Buchwald said that only Net’s “top line was successful,” and that with Yoox’s financially engineered infrastructure, current product development, relations and inventories, execution will be according to plans. “Yoox will be the dominant culture. But what is next?” Without Massenet’s guide, Buchwald wondered if Net could lose what made it so special.
While Net-a-porter had in the past registered losses — though it swung to a profit of 1.8 million pounds, or $2.9 million, in the year to March 31 — it’s understood that those losses were more reflective of shared service charges and share-based payment charges that came with being part of Compagnie Financière Richemont. In the year to March, sales reached a record 654.1 million pounds, or $1.05 billion.
One source pointed out that earnings before interest, taxes, depreciation and amortization at the firm has grown steadily over the past three years, rising to 54.2 million pounds, or $90 million, in 2015, up 43 percent on the previous year.
While there was praise for Massenet in many quarters, another luxury analyst defined Marchetti as “the leader and star” of the merged group and said the entrepreneur “wants to be in charge — he would have been in charge with Massenet and obviously will be so without her, so in this sense her exit changes nothing. There is perhaps the only risk of losing a more fashion and glamorous culture represented by Massenet and her story. But that attitude is not margin-friendly, so perhaps the Bourse appreciates this.”
At 2.30 p.m. on the Milan Bourse, where Yoox is traded, shares were up 5.16 percent to 27.90 euros, or $31.42 at current exchange rates, after being suspended earlier Thursday morning following an excessive rise. Shares finally closed at 27.85 euros, or $31.36, up 4.98 percent.
Despite reports that friction between Massenet and Marchetti had been a factor in her resignation, Marchetti was positive about her contribution to the company Thursday. Speaking to WWD, Marchetti said: “As a fellow entrepreneur, I have to say ‘hats off’ to Natalie Massenet. I’d like to take this occasion to congratulate her for having created such a wonderful company with an exceptionally talented team of professionals. I am very excited to help write the next chapter in the future of Yoox Net-a-porter Group and I wish Natalie all the best.”
In a separate statement Thursday, Massenet characterized the merger with Yoox as “the right time for me to move on to explore new ideas and opportunities.” On Wednesday, the U.K. Companies and Markets authority had cleared the planned merger of Yoox SpA with Net-a-porter Group, paving the way for the merger to be completed in October as planned.
“The business I started in 2000 could not be in better shape today,” her statement read. She also pledged support for the merged Net-a-porter and Yoox Group. “Having joined forces with Yoox Group, the company will be bigger, stronger and superbly well-positioned under Federico [Marchetti’s] leadership to lead the industry and create the future of fashion,” she said, adding, “As a continuing loyal customer I will be excited to see the next chapter for this amazing business.”
Massenet also hinted at her future plans. “My entrepreneurial drive is as strong today as it always has been, and my passion for innovation will continue to be my greatest guide in business,” she said. “The incredible experiences and memories of the past decade and a half…will always be an inspiration to me.”
It’s understood that the decision to depart the firm was a personal one for Massenet, and one that she arrived at after marking her 50th birthday this summer. She is said to have come to the conclusion that the newly merged Net-a-porter and Yoox Group would be a much bigger organization than the one she had built, and instead wanted to look at exploring new ideas.
As to Massenet’s role as chair of the British Fashion Council, Caroline Rush, the BFC’s ceo, said that she is “fully committed” to her role as chair until she completes her term in February . Rush also described Massenet as “an entrepreneur who has absolutely changed the face of the fashion industry,” noting that she has “ideas by the thousands.”
It’s long been speculated that following her resignation Massenet could wind up taking a role at Condé Nast, and could potentially be a successor to Anna Wintour at American Vogue, given her command of both the editorial and e-commerce worlds. Condé Nast is also on the verge of launching Style.com as a new e-commerce site, which would clearly suit Massenet’s background. Asked about the rumors Thursday, a spokeswoman for Condé Nast International in London said there are “no plans” for Massenet to take up a role at Condé Nast.
Massenet is said to be weighing different offers and options as to future entrepreneurial projects, not necessarily within the fashion sphere, and it’s understood she wouldn’t plan to compete directly with the company she built. As reported, the executive has a 12-month non-compete arrangement with Richemont.
A spokeswoman for Richemont said that the firm is not commenting on Massenet’s departure. She did not confirm reports that Massenet has walked away with around 100 million pounds, or $166 million, after selling shares in Net-a-porter. However, it’s understood that Massenet has disposed of all her holdings in the business.
Generally, analysts were unsurprised at Massenet’s departure. Analysts at Bank of America Merrill Lynch said in a research note that “it had been clear for some time that Natalie Massenet was not supportive of the Yoox tie-up and news flow relating to valuation challenges pointed to growing tension between Compagnie Financière Richemont and [Massenet] and some of the original founders that still owned 7 percent of the Net-a-porter holding company.”
The bank’s analysts commented on “the peculiar nature” of the five-year agreement between Richemont and the e-tailer, as the latter was controlled but not managed by the luxury group, which “resulted in action taken on the very first day this agreement was no longer binding,” permitting Massenet “to become one of the best-paid businesswomen in Europe. We also believe the rather limited official remit of her new responsibilities was telling.”
However, the analysts suggested that the new group’s operations were unlikely to suffer. “It is possible other managers close to [Massenet] may leave, although only a select few have been made rich through [Net-a-porter] and we would expect the bulk to stay put given the formidable opportunity provided by the [Yoox Net-a-porter Group] platform.”
The analysts at the bank also pointed out that, in light of Massenet’s “hostility to the merger it is far better for this situation to be resolved sooner rather than later.”
“As a reminder, [Net-a-porter’s] enduring problem was its high cost base and limited operational leverage, both of which we expect the new setup to aggressively address in 2016.”
Citi sees “Massenet’s exit as a neutral event,” and believes the merger will go ahead as planned. “[Massenet’s] talent will be missed but at the same time integration [of the two firms] might be much smoother,” its analysts said.
Mediobanca said “this piece of news has no impact on group fundamentals and prospects.” The bank believes the development actually strengthens Marchetti’s “positioning within the new combined entity. We keep our Out Perform on the name.”
Busquets, meanwhile, praised Massenet’s “courage,” in walking away from the firm. While noting that she “respected” Massenet’s statement, Busquets said that “it was an insult to put her in a lesser role than [Marchetti]. Federico has built a nice company, but it pales in comparison to [Net-a-porter], which is the jewel of the luxury e-commerce business.”
Busquets characterized Richemont’s initial deal for the merger as placing a “stupid” valuation on Net. “It can’t be easy to see your majority shareholder first do a deal with a less-than-optimal partner, and second at a stupid valuation that basically gave a gift to the Yoox shareholders…of hundreds of millions of pounds,” she said. As reported, Net’s minority shareholders, including Busquets, in August secured a value of 1.5 billion pounds, or $2.34 billion, for Net in the merger following an independent appraisal, a figure that was 500 million, or $750 million higher than Richemont’s original valuation for Net when the deal was announced.
Musing on Massenet’s next move, Busquets said: “I hope she will enjoy a much deserved rest, enjoy life and her two lovely daughters. Every financial luxury and e-commerce investor in the world will be falling over themselves to back Natalie in anything she does. And knowing Natalie, any time off she takes will be short-lived. She has too many ideas and too much energy.”
Busquets added: “She transformed the luxury e-commerce space with [Net]. I can’t wait for Act Two, now that she has more experience and she will be able to choose new partners that understand the luxury e-commerce space.”
A number of British fashion names also underlined Massenet’s achievements at the firm.
Christopher Bailey, Burberry’s chief creative and chief executive officer, described Massenet as “a rare talent who has created an incredible brand that has redefined the world of fashion retail. To do that requires a mixture of extraordinary business acumen combined with a real creative vision. Few people possess both skills and fewer still manage to create a successful business worth almost 1.5 billion pounds with them. It will be very exciting to see what she does next.”
Designer Anya Hindmarch pledged that Massenet “could go on to do anything she turns her mind to — she loves the world of fashion and business obviously, but is also fluent in technology, film [and] photography. I cannot wait for her next chapter.”
Hindmarch was also confident of Net-a-porter’s future without Massenet. “Natalie has done what good leaders do; she has made [Net-a-porter] completely ‘stand alone’ and has hired the strongest management team,” she said. “[Net-a-porter] will continue to thrive, and I know how proud that would make Natalie to watch ‘her baby’ grow to greater heights.”
Danny Rimer, a partner in venture capital firm Index Ventures, which had at one point been an investor in Net-a-porter, described Massenet as “a pioneer in helping to build the fashion industry online and [who] successfully expanded luxury into a lucrative category.” On how the business will evolve without her influence, Rimer said, “I think Natalie has trained so many people at the company that her DNA and perspective on marrying commerce, content and community is now built into the culture,” he said. “She’s obviously a force of nature, so we’ll see.” As to Massenet’s future, Rimer said the executive “has been a huge inspiration for entrepreneurs across a variety of industries, including fashion and e-commerce. Given the impact she’s already had on technology and luxury, I can’t wait to see what she does next,” he said, adding that “selfishly, we’d love for her to bring her knowledge and capabilities to the start-up ecosystem.”
Massenet founded the firm in 2000 with private investment, and went on to build the first e-commerce site that was able to woo labels such as Alexander McQueen, Tom Ford, Chloé, Marc Jacobs and Jimmy Choo to sell on the site. She also elevated the online shopping experience, introducing editorial around the product, with the launch of The Edit, Net-a-Porter’s online magazine, and eventually Porter, the print glossy. After initially selling a minority stake to Richemont, in 2010 she sold the majority of the firm to the luxury group in an agreement that valued Net-a-porter at 392 million euros, or $522 million. Massenet was said to have received 50 million pounds, or $83 million, following that deal.