March 4, 2024

One of the biggest names in luxury retail is still alive, but at what cost?

South Korean retail giant Coupang announced on Monday (December 18) that UK online fashion destination Farfetch will rescue with a $500 million deal. That money saves Farfetch from the dustbin of history for now, but it also dooms the company’s relationship with longtime rival Yoox-Net-a-Porter (YNAP).

Farfetch looked once ready to compete with Amazon for the crown of luxury fashion online. The year it went public, in 2018, Farfetch acquired footwear resale platform Stadium Goods for $250 million. In 2019, he bought New Guards Group, the conglomerate behind the rise of brands like Off-White and Palm Angels, for $675 million. Yes, Farfetch is selling itself for less than it paid for one of its own subsidiaries just a few years ago.

A big climb, a big fall

When internet retailing has begun to absorb customer dollars that were not spent at brick-and-mortar locations during the pandemic, Farfetch rode that enthusiasm to a $23 billion valuation in early 2021. The following year it has announced its biggest target yetYoox-Net-a-Porter, itself a combination of two online luxury fashion retailers. The plan was to exchange $1 billion of its shares for a 47.5% stake in YNAP from Cartier owner Richemont Group.

But not anymore. Early 2022, Farfetch cut his lead after the covid-19 restrictions, sales suffered in China, its second-largest market, and the incursion into Ukraine meant it would withdraw from Russia, its third-largest market. Moreover, it has struggled to sustain the spectacular growth it saw during the early part of the pandemic. In November, the company said it would not disclose its financial results for the third quartergiving rise to speculation that it would be as well go private or shut down completely. Since the stock peaked in February 2021, Farfetch shares have lost almost all of their value.

Richemont really, really wanted to sell YNAP. The conglomerate acquired a controlling stake in Net-a-Porter in 2010, and in 2015 that company merged with Yoox, which sells off-season luxury stocks. In 2018 it did $3.3 billion spent for full control of the joint venture, but struggled to justify that price tag. When Richemont reached the agreement to sell half of the company to Farfetch, it wrote down $2.7 billion on YNAP.

Observers weren’t sure if Farfetch would be able to continue until it closed the deal, which only regulatory investigation cleared this October. But on Monday, Richemont ended any uncertainty by saying it was terminate the agreement and abandoned efforts to adopt Farfetch’s back-end technology, citing the company’s acquisition by Coupang.

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