Yoox Net-a-Porter Group Stresses ‘Nothing Will Change’ If New Potential Buyer Acquires It

MILAN — The Yoox Net-a-Porter Group stands by its five-year growth target — and stressed nothing is going to change if Compagnie Financière Richemont succeeds in its bid to acquire the entire entity.

Responding to analysts’ questions about Richemont’s bid as the e-tailer reported 2017 results on Tuesday, corporate development and investor relations director Silvia Scagnelli said the luxury group “clearly stated that YNAP is to run as a separate company. YNAP also has always treated Richemont, which already was its largest shareholder, the same way. This will continue in the future. Nothing will change as the result. Richemont said that one of the reasons for the bid was to give additional resources to YNAP to grow faster.”

She also pointed to media reports of  Kering’s “positive comments” on the takeover (YNAP manages the sites for a number of Kering-owned brands).

In January, Richemont launched a voluntary tender offer on all ordinary shares of the Yoox Net-a-Porter Group SpA at 38 euros a share, for a value of up to 2.77 billion euros ($3.43 billion). Richemont plans to acquire 51 percent of the YNAP shares it does not already own. The public tender offer will be made through the special-purpose vehicle RLG Italia Holding SpA, a company that is in the process of being incorporated. It will be entirely owned indirectly by Richemont. If the deal goes through, the intention is to delist YNAP from the Milan Stock Exchange. Its bid values YNAP at about 5.3 billion euros.

In February, Italian stock market regulator Consob said it wanted more details before giving Richemont the green light to proceed, suspending its review of the Swiss company’s official offer document to take a look at YNAP’s 2017 financial results. Market sources on Tuesday said that they expect the offer to be completed in four to six weeks, once Consob has validated the offer.

CEO Federico Marchetti underscored that a new agreement with Balmain was signed after the tender offer was revealed. “This is just the first example. We continue to run independently as before.”

Balmain is controlled by Mayhoola, as is Valentino, and the executive emphasized the kick off of the new Next Era omnichannel business model for the latter. “The product is everything,” he said.

To be sure, the company last year continued to expand its brand portfolio, launching Azzedine Alaïa, which chose Net-a-Porter as its exclusive online retail partner (Alaïa is also owned by Richemont); the exclusive Mr Porter x Gucci capsule collection; and the Chloé and Stella McCartney collections, among others. The fine jewelry and watches category saw the launch of Cartier (Richemont’s largest single brand), Boucheron, Buccellati, Chopard, Jaeger-LeCoultre, Officine Panerai and Tag Heuer.

Marchetti also said that Mr P., Mr Porter’s label, performed strongly and will launch shoes and accessories in 2018. Yoox will also launch its own label this year. Ferrari is another new brand and Marchetti said he was “very pleased” about this addition. “It shows our reputation is very high. Ferrari is one of the most powerful Italian brands, in terms of lifestyle, innovation, technology, and it will be on the new platform, the same as Moncler’s, completely mobile-friendly, with more content and we expect a sizable contribution.”

Asked about reports of a potential Farfetch initial public offering, Scagnelli said: “I don’t think it will change the competitive environment. It will probably be more visible.”

Also responding to a question about developing China, she said YNAP is “assessing potential partnerships in China, but we are not in the position to say if it will impact 2018 and beyond.”

The company did address the joint venture with Mohamed Alabbar to develop business in the Middle East, saying it is progressing well for Yoox, following the establishment of a local office and distribution center in the region.

Marchetti also remarked on the recent launch of Net-a-Porter’s new online platform, Porter Digital, which now delivers exclusive daily content in four languages. “In the first three weeks since the launch, unique visitors and revenue directly generated by shoppable content doubled,” he said.

Meanwhile, Marchetti confirmed his earlier 17 percent to 20 percent organic growth target in revenues for 2018, leveraging all business channels and geographic markets.

“We are still on target, and I am very proud of our 2017 results and our team,” he said during a conference call with analysts on Tuesday after trading hours.

Currencies and increased amortization on higher capital expenditures in IT and logistics dented YNAP’s bottom line, but the e-tailer reported growth in revenues and earnings before interest, taxes, depreciation and amortization in 2017, fueled by all business channels in all regions. Chief financial and corporate officer Enrico Cavatorta pointed to the “sharp” decrease of the dollar in November and December, which “played a negative role” in the second half.

Adjusted net profit decreased 26.1 percent to 51.2 million euros, compared with 69.3 million euros in 2016. The company attributed the drop mainly to a significant increase in net financial expenses due to foreign exchange rate losses, coupled with a greater incidence of ordinary depreciation and amortization attributable to higher capital expenditures.

In the 12 months ended Dec. 31, adjusted EBITDA rose 8.6 percent to 169.2 million euros, compared with 155.7 million euros in the year before.

Preliminary sales reported in January were confirmed, showing an increase of 11.8 percent to 2.1 billion euros, compared with revenues of 1.87 billion euros in 2016. On an organic basis, sales were up 16.9 percent.

Cavatorta said he could also confirm adjusted EBITDA in 2020 of between 11 percent and 13 percent, “probably at the lower end,” due to the new scheduling of the in-season migration. He underscored that the consensus stood at 10.5 percent for 2020.

Marchetti trumpeted the 2017 EBITDA figure which, he said, amounted to the revenues of most of the group’s competitors, and despite mistakes, such as a slower than expected migration. Last year marked the migration of The Outnet to a shared omnistock platform for the off-season business line. For 2018, “we decided to derisk that and decouple the migration of Net-a-Porter and Mr Porter and one store at a time,” he explained.

The migration of the latter will be completed this year. “We postponed the Net-a-Porter migration by a few months [into 2019]; it simply does not make sense to move during the holiday season and all at once for a big bang, it’s common sense and learning from experience,” emphasized Marchetti.

In 2017, the group continued to enhance its existing technology and operational capabilities while investing in the convergence to one shared global technologistics platform. Capital expenditure amounted to 169.3 million euros,  compared with 136.9 million euros in the previous year, primarily devoted to technology.

In 2018, said Cavatorta, adjusted EBITDA margin at constant exchange rate will see an improvement of 30 to 70 basis points on 2017. Currency headwinds “will progressively ease in the second half,” he added. The group plans to invest about 170 million to 180 million euros and improve free cash flow absorption compared with 2017, also due to the postponement of the Net-a-Porter migration. Investments will be mainly dedicated to the convergence to the new omnistock setup and the ongoing development of the new shared technology platform.

YNAP will continue to focus on its mobile offering with a strong focus on native apps and the rollout of localization and omnichannel features. In 2017, for the first time, sales from mobile exceeded 50 percent of the group’s revenues. YNAP also plans to expand its operations with the opening of a new in-season hub in Milan and additional spaces at the Interporto logistics pole in Bologna, Italy.

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