Richemont/YNAP: cut-price lux sale casts doubt on Rupert’s foresight
When Switzerland’s Richemont fully acquired Yoox Net-a-Porter in 2018, Lex thought it was an odd fit beside luxury brands such as Cartier jewellery and Mont Blanc pens. As predicted, the online luxury goods retailer has found its way back on to the market after just a few years.
A €2.7bn writedown after two decades as an investor in YNAP adds grist to the mill of activists hoping to loosen the grip of chair Johann Rupert. The trigger is Richemont’s decision to sell a controlling stake in YNAP to Farfetch for 12 per cent. The US-listed acquirer has an option to buy the rest of YNAP’s stock later.
Pressure on Rupert from the likes of Bluebell and Third Point is lessened by a dual-share class structure. These are typically destructive of shareholder value, unless accompanied by a sunset clause. But for longtime boss Rupert, this is more than compensated for by wielding half the votes with an economic interest of only one-tenth of the stock.
Bluebell, a small UK activist, wants to get Francesco Trapani, who ran Bulgari and is close to lux giant LVMH, on to the board. This plan has just received a thumbs down from proxy adviser Institutional Shareholder Services. Underperformance supports the case for minority shareholders to do the opposite at September’s annual meeting.
The theory that luxury goods lend themselves to online retailing remains unproven. Inside Richemont, YNAP sales growth failed to impress even during the pandemic. The business has never made a profit. Shares in Farfetch and Germany’s Mytheresa, down 87 per cent and 66 per cent respectively since the start of 2021, tell the same story.
Including operating losses YNAP has absorbed about €4bn of Richemont cash since its inception, says Bluebell. Hence a discounted sale price, 0.4 times sales or below half of Farfetch’s valuation.
Underperformance extends to Richemont’s own shares. These have trailed peers LVMH and Kering over the past five years. It is time to start dusting the cobwebs out of the boardroom.
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