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Richemont in ‘Advanced Talks’ With Farfetch on YNAP Spin-Out

The Cartier owner has been looking for options to turn around or deconsolidate the loss-making e-commerce division. Farfetch could take a major role in providing technology for Richemont brands as part of the deal.
Richemont says in ‘advanced talks’ with Farfetch on YNAP spin-out. Courtesy.

Swiss luxury group Richemont is in “advanced talks” to bring on Farfetch as a technology partner and minority investor in its loss-making Yoox Net-a-Porter unit, the company said in a statement Friday.

The deal being discussed could include spinning out e-tailer YNAP with investment from Farfetch alongside other parties, as well as YNAP using Farfetch’s technology systems to transition to a hybrid model that would blend traditional wholesale with a marketplace strategy.

Richemont said it was also discussing with Farfetch how to leverage the fashion-tech giant’s systems to accelerate progress on “new retail” at its brands, as well as the prospect of the group’s brands joining Farfetch’s marketplace. Farfetch confirmed the talks in a statement.

”Richemont is pleased to announce that further progress has been made towards creating a neutral, industry-wide platform, built on the latest omnichannel retail technologies, to support the digitisation of the luxury industry,” the company said.

Earlier Friday, Richemont reported six-month financial results that beat estimates, with sales rising 20 percent over 2019′s pre-pandemic levels to €8.9 billion ($10.2 billion). Operating profit quadrupled to €1.9 billion.

After Richemont purchased Net-a-Porter in 2010 for around $550 million, only to spin it out in a merger with Yoox and then buy back the combined company in 2018 for as much as $3.3 billion (then seen as a visionary move), YNAP has turned into a persistent headache for Richemont.

YNAP became loss-making again by 2019, and a botched technology upgrade failed to stop the departure of white-label clients like Kering and Moncler. Losses deepened to €420 million last year, and the unit is set to lose upwards of €300 million this year.

A merger with Farfetch could be the best way out, and Richemont has been courting the platform helmed by Portuguese fashion-tech pioneer Jose Neves, in part by sinking $550 million of investment into the YNAP rival last year.

If the deal goes through, migrating YNAP’s business to Farfetch’s systems could salvage the value of Net-a-Porter’s brand and client list while stemming losses.

The opportunity for Farfetch to power omnichannel services for Cartier — jewellery’s biggest brand and the number two player in watches — as well as selling the brand on its marketplace has been a key bargaining chip in the negotiations, Miss Tweed reported last month. Richemont’s comments that its brands could end up working with Farfetch as part of a deal appear to confirm that.

Learn more:

Richemont Under Pressure

Cartier’s sales are booming, but its Swiss owner faces mounting pressure to clean house. Activist shareholders are likely to push governance issues and steep losses at YNAP into the spotlight.

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