Luxury is weak, the rise of the tide brand, it is reasonable to take advantage of it
According to the Fashion Network report, on August 9th, Farfetch, a well-known luxury e-commerce platform from the UK, announced a $675 million acquisition of Off- WhiteTM’s parent company, the Italian luxury goods company New Guards Group. Half of the purchase price is paid in cash and half is paid in the form of Fartech shares. The acquisition will be completed in the third quarter. To this end, Farfetch and JP Morgan Chase reached a $300 million financing agreement.
However, after Farfetch announced its acquisition of the New Guards Group, the company’s stock price on the New York Stock Exchange plunged more than 40%, which seems to be an unimportant deal.
In the acquisition of the tide brand, the joint name of the first-line luxury brand LV and the first-line street brand Supreme in 2017 became a good story, opening the door to the young world for LVMH, the financial report data growth is gratifying, and also consolidating Supreme in fashion. The status of the world. The new consumption power and aesthetic trend are changing, and the trend of luxury goods is gradually becoming a trend.
This acquisition is different, “the first-line luxury e-commerce platform and the first-line tide brand marriage.”
Farfetch CEO José Neves said that Farfetch, with more than 650 boutiques, will join forces with New Guards Group to give the company more power in the industry, attract more brands to Farmfetch, and bring sales growth to the company. .
At the same time, Farfetch also emphasized that this is to add a “brand platform” to the Group’s existing technology, data and logistics platform, expanding its business from technology solutions and global distribution capabilities to design, production and brand development; Consumer groups, large boutique networks, important data insights, and current expert design capabilities drive the brand’s future.
New Guards Group was founded in 2016. In addition to the brand Off-WhiteTM, the group also has a number of global street fashion brands such as Palm Angels, Heron Preston, Unravel Project, Marcelo Burlon County of Milan, Kirin Peggy Gou, Alanui, etc., formed a more promising brand matrix.
But this acquisition also means that Farfetch’s business model has changed: it was primarily a third-party platform that partnered with boutiques and fashion brands to provide online trading venues, and Farfetch took commissions on the trade. And whether the direct acquisition of the brand now allows the brand to function as usual and grow? How will Farfetch balance the relationship between its own brands and third-party brands?
Since its inception, the New Guards Group has been relished by more than just a multitude of brands, as well as numerous designers and creative directors. Off-WhiteTM founder Virgil Abloh is a very representative one. In March 2018, he also served as the artistic director of men’s clothing at Louis Vuitton, which caused great concern in the industry and indirectly increased brand awareness. Because of this, LVMH was exposed to the acquisition of New Guards Group, but ultimately failed to make it.
After the acquisition, these key creative people are also the core resources of the New Guards Group. Where will they go from here?
Virgil Abloh
In fact, Farfetch hopes to achieve profitability through acquisition. Although the 2018 and 2019 financial reports have good performance figures, the total transaction volume and sales volume are growing, but they have not achieved profitability, and the losses are still expanding. For example, the latest issue released on Thursday, the second quarter of the 2019 fiscal year data showed that Farfetch sales rose 42% year-on-year to $209.3 million, exceeding analysts’ expectations of $199.7 million, but Net loss increased from $11.7 million in the same period last year to $89.6 million.
From the financial data point of view, the New Guards Group is quite strong. For the fiscal year ended April 30, 2019, New Guards Group had revenues of $345 million and pre-tax profit of $95 million; revenues for the first half of 2019 increased 59%. Moreover, Off-White has become one of the top 10 most popular brands on the Farfetch platform for GMV.
Farfetch’s loss is related to its frequent trading. Farfetch’s previous acquisitions have been ongoing and focused on channels. In July this year, Farfetch acquired the top-of-the-line luxury store e-commerce platform platform of JD.com for $50 million to see JD’s logistics capabilities and insight into Chinese consumers. . In December last year, Farfetch, which was less than three months old, acquired the Trends e-commerce company Stadium Goods for $250 million, in order to increase the company’s sales in sports shoes and streetwear. Before listing, Farfetch also had two acquisitions. First, In June 2017, it acquired Condé Nast’s fashion e-commerce Style.com for $12.41 million. In 2015, it acquired the London buyer’s store Browns.
On the other hand, not profiting has a certain relationship with the weakness of the luxury market. Therefore, I hope to realize my own sales income through the rise of the tide brand, and to attract young consumers. After all, the world’s major consumption power has shifted to the millennial generation with both purchasing power and individuality.
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