Richemont to Sell e-Commerce Business YNAP to Mytheresa — 2nd Update

By Andrea Figueras

Cartier owner Richemont agreed to sell its e-commerce business Yoox Net-A-Porter to luxury online platform Mytheresa, nearly a year after a previous attempt at offloading the loss-making business was called off.

The deal allows Richemont to part ways with YNAP, of which it took control in 2018. The Swiss luxury group has been seeking a buyer for YNAP in recent years after the business struggled to turn a profit and forced its parent company to book multibillion-dollar write-downs.

The luxury industry is confronting a slowdown in demand that has been particularly acute in China, weighing on high-profile names including Richemont. Meanwhile, online luxury platforms have been dealing with their own profitability issues, after a sales boom during the pandemic came to an end.

News of the deal with Mytheresa comes after Richemont said in December last year that a previous attempt to sell YNAP fell apart after British-Portuguese online luxury marketplace Farfetch, which was set to buy the business, faced financial difficulties.

Richemont said Monday that it expects to take a 1.3 billion-euro ($1.43 billion) hit as a result of the deal, under which it will sell YNAP with 555 million euros in cash and no debt in exchange for a 33% stake in Mytheresa. In its last two fiscal years, Richemont booked write-downs on YNAP's assets of 1.5 billion euros and 3.4 billion euros.

Richemont--the owner of Van Cleef & Arpels and Montblanc--will have the right to nominate a member and an observer to Mytheresa's supervisory board, it said. Mytheresa's parent company, MYT Netherlands Parent had a market capitalization of $367 million as of Friday's close, according to Factset.

Under the deal, YNAP's luxury division will be integrated into Mytheresa, the business's off-price division--comprising Yoox and The Outnet--will be separated and its white-label division will be discontinued, the companies said. Richemont will provide a six-year revolving credit line of 100 million euros to fund YNAP's needs.

The transaction is expected to close in the first half of 2025, subject to customary conditions, and doesn't require the approval of the companies' shareholders.

Richemont took control of YNAP in 2018, three years after the business was formed through the merger of Italian e-commerce firm Yoox and London-based Net-a-Porter, in a move that sought to capture the expansion of luxury from high-end boutiques to the digital environment and find new ways of reaching customers.

With its acquisition, Richemont pursued a turnaround, but failed to make the business profitable. In its latest earnings report for quarter to June, YNAP reported a 15% decline in sales.

News that Richemont finally found a buyer for YNAP should be taken well almost a year after the Farfetch deal failed, Citi analyst Thomas Chauvet said in a research note.

Shares in Richemont traded 1% higher in morning trade in Europe.

The deal comes at a time luxury names are facing challenges on multiple fronts. In China, which fueled the industry's growth for years, luxury companies now dealing with flagging demand amid a sluggish property market and weak consumer sentiment in the country. In addition, inflation and pricing fatigue hurt luxury demand in the West, particularly among status-seeking and less wealthy shoppers.

Richemont's exclusive jewelry brands such as Cartier and Van Cleef & Arpels have helped the company fare better than other rivals, as these labels target well-heeled buyers, but the group reported a sharp decline in sales for the region that includes China in its most recent quarter.

Write to Andrea Figueras at andrea.figueras@wsj.com

(END) Dow Jones Newswires

October 07, 2024 05:43 ET (09:43 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.