MILAN – For the first time since the merger, the Yoox Net-a-porter Group released pro-forma financial results for the first nine months of the year, showing growth in both profits and revenues, boosted by all channels and in all markets.
The synergies of the merger “exceeded expectations,” said chief executive officer Federico Marchetti, who also boosted the level of expected cost savings to 85 million euros, or $94.3 million, from 60 million euros, or $66.6 million.
“This is very, very exciting for me, after many years thinking of this merger, to see ideas coming to reality and an even bigger number of synergies,” said Marchetti during a conference call with analysts. The entrepreneur underscored that there would be “no compromises on quality, luxury and people” and “no layoffs” because of the synergies. Corporate development and investor relations director Silvia Scagnelli said there would only be “a slowdown in hiring.”
Pro-forma adjusted net profits in the nine months ended Sept. 30 jumped 50.4 percent to 32.4 million euros, or $36 million, compared with 21.5 million euros, or $29 million, in the same period last year. Excluding 6 million euros, or $6.6 million, of non-cash incentive plan costs net of their related tax effects, profits almost quadrupled to 26.4 million euros, or $29.3 million, compared with 6.7 million euros, or $9 million, in the first nine months of 2014.
Pro-forma revenues climbed 32.2 percent to 1.2 billion euros, or $1.3 billion, compared with 894.1 million euros, or $1.2 billion, last year. At constant exchange rate, sales grew 21.5 percent.
“Our integration work is progressing very well and Yoox Net-a-porter Group is exceptionally positioned to deliver on its significant potential,” said Marchetti, who added that the results are a “testament to the strategic rationale of this game-changing merger.”
One of the first effects of the merger is the shuttering of Thecorner.com and Shoescribe.com. By the end of the spring/summer 2016 season, customers clicking on those sites will be redirected to the group’s other multibrand online stores. Scagnelli underscored that all dedicated teams will be fully reallocated within the group. The two online stores together accounted for 2.4 percent of the group’s pro-forma revenues in the first nine months of 2015. Scagnelli said the group expected net positive effect of earnings before interest, taxes and depreciation “as soon as 2016” and limited revenue loss.
She outlined that the group will leverage 45 synergies in six different areas: retail, operations, corporate, technology, marketing and content, brand relations. In retail, for example, the company expects additional sales, improved full price sell-through and retail margins across its online stores “thanks to the development of a shared virtual global inventory across markets and storefronts,” dubbed “Global Inventory.” The company plans to invest more in the warehouses in Italy and the U.S., she said.
In the first nine months, the group counted 2.3 million active customers, compared with 2 million in the same period last year, and 26.1 million average monthly unique visitors, compared to 22.4 million last year .
During the period, the multibrand in season business line, which includes Net a Porter, Mr. Porter and The Corner, and Shoescribe saw revenues grow 39 percent to 644 million euros, or $714.8 million, driven by the Net-a-porter and Mr Porter sites, which, during the third quarter of the year, introduced Tom Ford’s apparel collections on both online stores, and exclusive capsule collections such as Portofino by Dolce & Gabbana, Cashmere Trench by Burberry London and Tod’s. This business line accounted for 54.5 percent of the total.
The multi-brand off-season channel, which includes Yoox and The Outnet, saw sales grow 26.7 percent to 420.7 million euros, or $467 million, representing 35.6 percent of the total.
The mono-brand business line of designer flagships, with 39 online stores, was up 18.5 percent to 117 million euros, or $130 million, accounting for 9.9 percent of the total.
The group grew in all its key markets, with Italy up 18.1 percent to 75.1 million euros, or $83.3 million, while the U.K. grew 38.3 percent to 184.3 million euros, or $204.5 million. Europe (excluding Italy and the U.K.) was up 17.2 percent; North America grew 48 percent (or 21.8 percent at constant exchange rates). The Asia Pacific region gained 38 percent boosted by Hong Kong, China, Australia and Japan. Sales in the Other Countries region climbed 26 percent.
The company expects lower capital expenditures from 2018. “In particular, more than half of the synergies at the EBITDA level are expected to come from cost savings and the remaining part from higher revenues,” said the company. “To achieve these synergies, the group expects to incur one-off investments and non-recurring operating costs amounting to a total of 95 million euros [$105.4 million] over the period 2015 to 2018, of which the vast majority relates to capital investments dedicated to the development of one techno-logistics platform across all the group’s online stores.” The group also expects anticipated profit and loss synergies to be positive as soon as 2016.
A proposal to appoint Eva Chen, head of fashion partnerships of Instagram, and Vittorio Radice, vice chairman of La Rinascente, as independent directors of the company will be submitted to shareholders.
Responding to an analyst, chief financial corporate officer Enrico Cavatorta said the expected capital increase is going to take place in 2016, “not shortly.”
Separately on Wednesday, Marchetti exercised his outstanding stock options to subscribe for more than 2 million YNAP shares and increased his shareholding in the group to 6.1 percent from the previous 5.7 percent.