Type: Richemont to promote on-line store stake to Farfetch, takes 2.7 bln euro writedown

The logo of the luxury goods company Richemont is pictured at its headquarters in Bellevue near Geneva, Switzerland, June 2, 2022. REUTERS/Denis Balibouse

ZURICH, Aug 24 (Reuters) – Richemont (CFR.S) Wednesday announced a long-awaited deal to offload most of its online fashion retailer YOOX Net-A-Porter (YNAP), clearing the way for its labels to sign up for technology run by luxury e-commerce specialist Farfetch (FTCH.N).

The deal, removing from its books a loss-making business that had become a distraction for the Swiss luxury group, was welcomed by analysts and Richemont shares were up 2.2% in morning trading.

The maker of Cartier jewellery and IWC watches said it expected a 2.7 billion euro ($2.68 billion) writedown related to the deal in which Farfetch will initially acquire a 47.5% stake, in exchange for over 50 million Farfetch shares. The estimated write-down could fluctuate, depending on the listed price of Farfetch shares and exchange rates, Richemont added.

Dubai Mall developer Mohamed Alabbar, will buy 3.2% through his investment vehicle Symphony Global.

The agreement follows months of negotiations that were complicated by the e-commerce sector’s retreat from pandemic highs as consumers returned to physical stores. Farfetch shares are down 60% over the past six months, and it missed first quarter sales expectations due to business disruptions from lockdowns in China as well as a loss of sales in Russia.

“This seems very good news for both companies,” said Bernstein analyst Luca Solca.

While Richemont will remove a “continuing source of losses”, Farfetch will get a welcome boost to traffic from e-concession deals with Richemont labels, he said.

The agreement between Richemont, Farfetch and Symphony Global also laid the path, through a put and call option mechanism, towards Farfetch potentially acquiring the remaining shares in YNAP.

The deal comes amid a flurry of industry-wide investments in digital services as luxury players shrug off past scepticism and embrace new channels to reach customers, spurred by a faster shift to online consumption during the pandemic.

“Excellent news for Richemont, at last. The deal closes years of underperformance and heavy investment in YNAP,” Vontobel analyst Jean-Philippe Bertschy wrote in a note, recommending the stock as a “buy”.

Richemont had said in November it was in talks with Farfetch about selling a minority stake in YNAP and said it was trying to get other investors on board. read more

Richemont has invested heavily in YNAP over the years, but its online distributors, which also include watch marketplace Watchfinder, still had an operating loss of 210 million euros in the fiscal year to March.

($1 = 1.0062 euros)

Reporting by Silke Koltrowitz and Mimosa Spencer; Editing by Edmund Blair and Tomasz Janowski

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