Luxury group Richemont in talks to cede control of lossmaking online retailer

Swiss luxury group Richemont is in “advanced talks” with online retailer Farfetch and other companies over a deal to invest in its lossmaking Yoox Net-a-Porter ecommerce business that has long been a sore point for investors.

The owner of Cartier and Van Cleef & Arpels warned that there remained issues to resolve over the price and terms, and stopped short of saying it would hive off the business into a separate company. But it did say it would no longer be the majority shareholder if the project was finalised.

The move would address a longstanding concern among investors, shortly after it was revealed that activist hedge fund Third Point had taken a stake in Richemont and was pushing for changes, alongside other shareholders such as US-based Artisan Partners.

Richemont shares rose more than 9 per cent in morning trading after it also published forecast-beating results.

Yoox Net-a-Porter, which sells clothing and accessories through two online shops, has lost market share to rivals and not benefited from the boom in online shopping during the pandemic. Its revenues grew 37 per cent to €1.3bn in the six months to the end of September, while operating losses held steady at €141m.

Johann Rupert, the chair and controlling shareholder of Richemont, said the potential deal would create a “neutral platform” and allow the luxury goods industry to share the costs of investment in technology and marketing required to compete in online commerce.

“This is not in response to activist pressure at all, we started this project a long time ago,” he said on a call with reporters. “Maybe some of them were listening and read this accurately so they invested and made money.”

Rupert declined to identify the other companies that might invest in YNAP, or how much money they would put in. Richemont already has a joint ecommerce venture in China with Farfetch and Alibaba.

Any activist campaign at Richemont would have to contend with Rupert’s tight control over the group’s strategy and managers. Although the South African businessman owns only 9.1 per cent of the capital, he controls 50 per cent of the voting rights under a dual-class share structure.

There has been speculation that Third Point could pressure Richemont to sell or merge the company with Gucci owner Kering because the two groups have complementary businesses and this would give them scale to better compete with sector leader LVMH.

On a call with reporters, Rupert said his previous rejection of a tie-up proposed by Kering was a “binding statement”.

“We made a clear statement that Richemont is not for sale and we are not interested in merging. We believe in our own businesses,” he added.

Richemont also posted strong half-year results on Friday driven by a strong rebound in demand for its watches and jewellery, especially in the US. Group sales rose 65 per cent at constant currencies to €8.9bn, ahead of analyst consensus of €8.5bn, but this reflects comparisons with a year ago when the pandemic was still raging in important markets.

Before Friday’s announcement, Richemont shares had advanced about 50 per cent this year, outperforming LVMH’s 38 per cent rise but trailing Hermès’ 60 per cent, as investors bet on the post-pandemic luxury renaissance and Chinese and US consumers continue to spend. But Richemont still trades at a roughly 10 per cent discount to the sector, according to Citi analyst Thomas Chauvet.

“The future is bright with these stellar results, although the announcement on YNAP rather than a spin-off might disappoint near term,” he said.

This story has been updated to correct a previous version stating that revenues contracted by 15 per cent to €934m in the six months to end September