YNAP Sales Grow 13.8% in 9 Months to $1.7 Billion

Well-balanced growth across its channels and markets helped lift revenues at the Yoox Net-a-Porter Group in the first nine months of the year, continuing its upward trajectory and expanding its offer of luxury brands.

Revenues at the fashion e-tailer were up 10.7 percent to 481.8 million euros ($560 million) in the third quarter, showing an acceleration in the U.K. and Europe, compared with 435.4 million euros in the same period in 2016. On an organic basis, revenue grew 17.7 percent. In the nine months ended Sept. 30, sales gained 13.8 percent to 1.5 billion euros, compared with 1.3 billion euros in the same period last year. On an organic basis, they increased 18.6 percent.

In an interview, CEO Federico Marchetti was upbeat about the number of visits, totaling 586.5 million, compared with 510.1 million in the first nine months of 2016, and the 6.8 million orders, compared with 5.9 million last year. “This is impressive for me,” he said. Marchetti highlighted the growth in all markets, noting a jump in the U.K. and an acceleration in Italy, driven by Yoox, which is leveraging “focused investments and marketing efforts.”

He emphasized the launch of Mr P, Mr Porter’s own label, on Nov. 7. “I am most excited about this. Surely the launch of Mr P is a great team success. It’s designed in the U.K. but made in Italy, except for the denim, which comes from Japan. The line was generated by customers and by what they wanted, what they were looking for online and did not find. It’s essential and simple yet stylish,” Marchetti said. “The big data we had went into the development of the collections. We worked on storytelling, and the line makes sense for customers.”

During a conference call with analysts at the end of trading in Milan, where the company is publicly listed, Mr Porter managing director Tony Bateman said Mr P will offer year-round essentials as well as five capsules. “We are debuting with ready-to-wear but will expand with shoes and accessories [with the fall/winter 2018 season],” said Bateman. He added that Mr P is expected to drive traffic and increase customer loyalty.

Marchetti also underscored the arrival of brands such as Chopard and Officine Panerai, which “have been a great success,” noting that the hard luxury category “is the one that is growing the most.” He remarked on these brands’ “super-selective distribution,” saying “it was not easy to get them online for the first time. So Net-a-Porter and Mr Porter have become destinations for the best watches,” he said.

Speaking of the Next Era omnichannel business model developed in partnership with Valentino, Marchetti said the company was “perfectly in time,” praising the technology team for the “great” work done. “We have delivered what we promised,” he said of the innovative single-view-of-inventory online tool. “We are starting with Valentino in the U.S. with a gradual rollout market by market,” he explained.

The joint venture in the Middle East with Mohamed Alabbar’s Symphony Investments, announced in November last year, is “actually ready ahead of time, as it kicked off [on Oct. 2 ] and not next year,” noted Marchetti. “We have a local team, a strong local CEO, a warehouse and offices, although it’s not entirely localized. The Middle East is one of the markets that is growing the most.”

The executive conceded the migration of The Outnet presented a small glitch, as it was “successfully completed on a state-of-the-art platform, but the migration to all warehouses from the U.S. and U.K. to Bologna is taking more than expected and we are one month late.” For this reason, he presented an updated guidance in the five-year plan for organic net revenue growth. “It’s still in the 17 to 20 percent range, but at the lower end of the scale. The good news is that it’s a one-off.” During the call, chief financial and corporate officer Enrico Cavatorta said the net revenue impact related to the Outnet migration in the last quarter of the year is estimated at around 20 million euros. The migration has “led to a temporary lower availability of product, but full assortment is expected to be restored by the end of November,” he said.

In the third quarter, the multibrand in-season business line, which includes Net-a-Porter and Mr Porter, was up 9.7 percent to 235.9 million euros. In the nine months, this channel was up 11.9 percent to 788.9 million euros. The in-season business line added exclusive capsule collections from Burberry and Giorgio Armani on Net-a-Porter. As of Sept. 30, the multibrand in-season business line accounted for 52 percent of total sales.

In the third quarter, the multibrand off-season business line, which includes Yoox and The Outnet, saw sales grow 14.4 percent to 203.6 million euros. In the nine months, sales were up 17.9 percent to 585.3 million euros.

In October, Yoox unveiled a new marketing campaign, featuring an omnichannel media mix including TV, cinema, out-of-home advertising and radio, said corporate development and investor relations director Silvia Scagnelli. The campaign, launched in Italy, Hong Kong and Japan, has already registered strong results in terms of engagement and will be extended to the U.S. in November ahead of the holiday season. The channel represented 38.6 percent of total sales.

The online flagship business for brands ranging from Giorgio Armani to Valentino, after accounting for the negative net perimeter effect resulting from discontinuations, posted sales down 0.1 percent to 42.3 million euros. They were up 4.8 percent at constant exchange. In the nine months, sales climbed 8.2 percent to 141.8 million euros. The channel accounted for 9.4 percent of sales.

In the quarter, YNAP saw a 13 percent increase in sales in the U.K. to 63.8 million euros. At constant exchange, sales in that market rose 20.1 percent. This shows the depreciation of the euro versus the sterling. In the nine months, sales totaled 202.3 million euros, up 5.5 percent, in that region.

North America, the group’s No. 1 market, was up 4.3 percent to 138.6 million euros in the third quarter, reflecting the sharp depreciation of the euro versus the dollar and lower markdowns. In the first nine months of 2017, revenues were up 15 percent to 461.1 million euros.

Italy posted another solid performance in the third quarter, driven by Yoox, with revenues of 34.1 million euros, up 14.1 percent. In the nine months, sales grew 12.7 percent to 98.5 million euros.

Excluding Italy and the U.K., Europe showed improving momentum, with third-quarter net revenues totaling 134.7 million euros, up 16.8 percent. In the nine months, sales grew 13.5 percent to 401.6 million euros.

Third-quarter revenues in Asia-Pacific totaled 82.2 million euros, up 7.1 percent, reflecting continued positive momentum in Hong Kong. In the nine months, sales increased 21.7 percent to 260.7 million euros. Cavatorta said the company has banned resellers in China, which is “penalizing the top line but will be beneficial for margins.” Scagnelli said the group was “very strong and very happy with what we are achieving in China.” In the wake of speculation about a partnership with Alibaba Group, asked by one analyst about the potential of such a venture, Scagnelli responded that YNAP is “open to access if they enable our growth, but the plan that we have started implies organic growth.”

Finally, the “rest of the world” area was up 18.1 percent to 28.5 million euros in the third quarter and 8.7 percent to 91.8 million euros in the first nine months.

Cavatorta said the impact of exchange rates in the fourth quarter will be “similar,” with an “adverse 3 percentage point, maybe a notch below for the year.”

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