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Farfetch Denies Reports of Plans to Acquire Barneys

The troubled US luxury retailer has until October to find a buyer, but Farfetch says it is not interested as the fashion platform grapples with challenges of its own.
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By
  • Sarah Kent
BoF PROFESSIONAL

LONDON, United Kingdom  Luxury online marketplace Farfetch Ltd has denied reports that it plans to acquire bankrupt department store chain Barneys New York Inc, a move that would have topped off a string of acquisitions that have left investors uneasy.

“The story is incorrect — Farfetch is not acquiring Barneys New York,” the company said in a statement.

The denial follows a report in The New York Post on Monday that claimed the UK-based e-commerce platform was nearing a deal to buy Barneys out of bankruptcy. The storied US retailer filed for Chapter 11 earlier this month, allowing it to stay open while it works out a turnaround plan.

Barneys wouldn't have been Farfetch's first foray into brick and mortar. In 2015, the company acquired London-based boutique Browns and has since helped to scale its digital business. Barneys, which also denied The New York Post report, could certainly use a digital reboot of its own, having underinvested in e-commerce for years. It is looking for a tech-savvy buyer in hopes of reversing its fortunes.

"Our intention that we’re setting is to come out of this with a very strong digitally focused partner and emerge on the other side and really be able to — with a healthier balance sheet and operating structure — implement the vision of the company," Chief Digital Officer Katherine Bahamonde Monasebian told Bloomberg last week.

That will be easier said than done. While a tech company like Amazon could see Barneys as a deal, it will take significant further investment to overhaul its operating model.

If Barneys does not find a buyer by its court-appointed late-October deadline, it will be forced to liquidate. An intellectual property auction typically attracts licensing companies, which often use the name to sell branded merchandise, especially overseas.

Meanwhile, Farfetch is facing its own challenges.

While the company continues to report revenue growth, its losses are also widening as a result of customer acquisition costs and spending on technology and infrastructure. It reported losses after tax of $89.6 million in the second quarter, compared to $17.7 million a year earlier.

That's made investors uncomfortable with the company's appetite for M&A. Its share price plummeted more than 40 percent earlier this month after it acquired New Guards Group for $675 million, more than twice the Milanese holding group's annual revenue and seven times its earnings before taxes. In theory, the acquisition positions Farfetch to build out its own private label platform, through which it can launch, test and scale brands. New Guards Group has launched many of luxury streetwear's most hyped and successful brands, including Off-White and Heron Preston.

The acquisition was the latest in a buying spree that Farfetch has been on since it went public a year ago. In February, Farfetch acquired JD.com's luxury platform Toplife for $50 million, hot on the heels of its December purchase of streetwear marketplace Stadium Goods for $250 million.

With the company’s share price trading down more than 40 percent since the beginning of the year, it is not clear investors are in the mood for another big — and risky — acquisition.

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