Richemont-Yoox not the best fit

Followers of fashion know that January sales can offer the best bargains. A bid from Swiss luxury giant Richemont for online designer sales hub Yoox Net-aPorter suggests the rule applies in mergers and acquisitions too. The deal looks certain to go through. But a quick glance at the rest of Richemont chairman Johann Rupert’s wardrobe suggests Yoox is not quite his style.

After Yoox and Net-a-Porter merged in 2015, Richemont ended up with a quarter of the voting shares as well as a lump of nonvoting equity that took its total holding to just under half. The 26% premium Richemont is offering for the rest of Yoox seems toppy at first glance. But the €38 a share offer values Yoox at 25 times enterprise value to forward earnings before interest, tax, depreciation and amortisation — a substantial discount to the UK’s Asos and Germany’s Zalando. Both sell cheaper garb through similar online services but trade at over 30 times.

Richemont claims there is industrial logic to the deal. But the high-end watches and jewellery that are its mainstay are something customers typically want to see and feel before buying.

Analysts at Exane BNP Paribas estimate no more than 2% of the group’s current sales take place online. Yoox also does not team stylishly with the rest of Richemont’s ensemble. This includes classic high-end luxury brands such as Cartier jewellery, Montblanc pens and Purdey shotguns. These contribute to group earnings before interest, tax, depreciation and amortisation margins of over 20% for Richemont. Yoox’s are under half that.

What Yoox does offer is exposure to online luxury fashion. Sales grew 17% in 2017 on a comparable basis. This is one area where the likes of Amazon are struggling for traction; luxury sellers do not want their wares sold in such an online bazaar, while customers do not care to buy from one either. Yoox is a cap that does not quite fit Richemont. Do not be surprised if it pops up in the corporate jumble sale a few years from now. London, January 24