Farfetch shares we surging by the news of expanding and partnering with Richemont, the luxury goods holding company and parent of brands like Cartier, Piaget, and Montblanc.
As a result, Farfetch stock was up 18.5% as of 11:46 a.m. EST on Friday, while Richemont stock gained 11% after delivering a strong earnings report this morning.
When U.S. markets opened on Friday, Farfetch confirmed it was in discussions with Richemont “in relation to a potential expansion of their existing Luxury New Retail strategic partnership,”
Richemont, which owns brands such as Cartier and Piaget, said on Friday it would also invite other firms besides Farfetch to participate in turning YNAP into a neutral, industry-wide retail platform with no overall controlling shareholder.
“An early Christmas present for Richemont shareholders,” said Kepler Cheuvreux analyst Jon Cox.
Richemont has invested heavily in YNAP, trying to make it less capital intensive by moving away from owning all of its inventory to a hybrid model where some goods are owned by third parties – inspired by Farfetch’s asset-light model.
In the press conference this morning, Farfetch has confirmed its partnership with Richemont for potential expansion of its existing Luxury New Retail strategic partnership.
Today, Farfetch stated that these two companies were discussed several options. Farfetch Platform Solutions was also a software suite for end-to-end commerce for luxury apparel brands to power Richemont’s brands and the online fashion retailer Yoox Net-A-Porter (YNAP). They were also considering having Richemont’s brands sell on Farfetch’s marketplace as well as a minority investment from Farfetch into YNAP.
“We made a clear statement that Richemont is not for sale and we are not interested in merging, so we believe in our own businesses,” Rupert, who controls the majority of voting rights in Richemont, said.
Richemont invested $300 million last year in Farfetch, alongside Alibaba Group Holding, and also put $250 million into a new joint venture in China involving Farfetch’s Chinese marketplace.
Richemont reported a jump in net profit to 1.25 billion euros ($1.4 billion) in the six months to Sept. 30, beating forecasts for 1.15 billion euros in a Refinitiv poll, but the company remained cautious.
The company will report third-quarter earnings on Nov. 18. Analysts are expecting revenue to grow 61.1% to $591.3 million and for its per-share loss to narrow from $1.58 to $0.36.
The company attributed the increases to a “customer-centric” and digital approach and Rupert noted in his statement that direct sales to customers in the period accounted for 74 percent of group sales in the six months.
Jewelry was a top performer, notching a 67 percent rise in sales to 5.10 billion euros in the period. The watch division, which Richemont had restructured pre-COVID, grew 74 percent to 1.68 billion euros, with direct sales to clients approaching 50 percent. Rupert said, “every watch Maison participated in this notable improvement.”
Ambitious – but also cautious – Rupert noted in the statement that the post-COVID world “is yet to emerge. For the second half of the year, volatility is likely to persist, including in terms of inflation and geopolitical tensions.”