Why Mytheresa Bought Yoox-Net-a-Porter

Mytheresa on Monday announced it would acquire its distressed competitor Yoox Net-a-Porter (YNAP) from Swiss conglomerate Richemont, perhaps the most significant deal yet in a year of upheaval for luxury retail that has left few of the category’s major players untouched.

Richemont said it would recapitalise Yoox Net-a-Porter to have a cash position of €555 million ($609 million) and no debt, as well as providing a rotating credit facility for the unit. The Cartier owner will eventually receive a 33 percent stake in the combined entity with Mytheresa.

The deal, slated to close in the first half of 2025, aims to bring together Germany’s Mytheresa, which has built a profitable business catering to ultra-high-net-worth shoppers, with the larger Net-a-Porter, which set the template for online luxury retail when it launched in the early 2000s with its mix of high-end merchandise and more accessible offerings. The companies will continue to exist as two standalone e-commerce sites.

The hope is that bringing the two firms under one roof will break the cycle of escalating customer acquisition costs, brand defections and similar-seeming product offerings that have dogged luxury e-tailers for years. Mytheresa shares spiked more than 50 percent on news of the deal, ending Monday at a four-month high.

“The vision is clear: clearly differentiated brand identities based on different assortments, different marketing, different customer touch points,” Michael Kliger, Mytheresa’s chief executive, said in an interview with The Business of Fashion. “There is so much room in luxury to fulfil these positions and attract different customers.”

The acquisition also brings to a close a long period of uncertainty for Net-a-Porter, which remains the first stop for many luxury consumers and brands seeking industry validation (the company was name checked on the most recent of HBO’s hit series “Industry” about young, high-earning finance professionals). But Net-a-Porter has long struggled to convert cultural cachet into consistent profits, both as an independent entity and under Richemont, which acquired the company in 2010.

In 2022, Richemont had agreed to sell a 47.5 percent stake in YNAP to Farfetch, with the opportunity for Farfetch to acquire its competitor once it reached profitability within three to five years. But that agreement failed when Coupang rescued Farfetch from near bankruptcy last December.

There were fears that Net-a-Porter could suffer a similar fate, or even be shut down, as was the case for rival Matches when owner Frasers Group placed the company in administration three months after acquiring it.

What Lies Ahead

Mytheresa has avoided the worst of the luxury e-commerce bust. But it has its own problems: with €914 million in gross merchandise volume — sales on its marketplace — in the year ending in June, it is smaller than its chief rivals. Its adjusted earnings before interest, taxes, depreciation and amortisation accounted for only 3 percent of net sales during that period. Even after surging on Monday, the company’s stock is down over 70 percent since its initial public offering in January 2021.

The YNAP merger, however, gives Mytheresa a chance to change that. The two companies’ combined GMV reaches nearly €3 billion, close to one-time leader Farfetch’s sales at its peak in 2022. Mytheresa plans for that to grow to €4 billion by 2029, the company’s finance chief Martin Beer said on an investor call on Monday.

Doing so will require reversing a steady slide in YNAP’s sales, which fell 15 percent year-over-year in the quarter ending in June. It will also need to carve distinct identities for the two sites, which have some overlap in the customers they cater to, and the brands they carry.

“Any merger is not easy,” said Mario Ortelli, managing director of luxury advisory Ortelli & Co. “You have to change the operating model. If for so long you were never profitable and your objective is not just to grow but profitability, you have to change something.”

Becoming a Leader

Mytheresa’s deal with YNAP is its chance to generate the type of sales that would make it the biggest company in luxury e-commerce.

Mytheresa will access YNAP’s distribution centres in China and the US, where it is seeing its largest sales growth. The company, which typically carries a smaller number of brands than its competitors, will enjoy the increase in sales volume from YNAP’s greater number of labels without compromising its curatorial focus.

Mytheresa’s core strengths can also rub off on YNAP. The Germany-based e-tailer has proven its ability to grow profitably by wooing its top spending customers, which has boosted profits because that cohort spends more money with each purchase and returns goods less frequently.

The company has been more successful than its competitors at offering exclusive capsule collections from brands like Loewe and Brunello Cucinelli, and hosting brand trips and private dinners with designers. It ended its full fiscal year in June with €25 million in adjusted EBITDA.

Mytheresa will help Net-a-Porter play to its own strengths, Kliger said, such as doubling down on its editorial content, which contextualises its product offering through celebrity interviews and other lifestyle content that appeals to its more aspirational luxury consumer base.

But if a deal is approved, Mytheresa will first have to undo Richemont’s efforts, where the Swiss conglomerate’s lack of expertise in running a digital business led to decisions that ultimately drained YNAP’s profits.

In 2010, Richemont acquired Net-a-Porter in a deal that valued the company at £350 million ($458 million). As the luxury e-commerce sector boomed, Richemont bought the remaining shares in YNAP that it didn’t already own in 2018 at a €5.3 billion valuation.

Amid rising competition from firms like Farfetch, the group increased investments in technology and logistics. But a €200 million upgrade led to functional hiccups on Net-a-Porter’s site and dissatisfied customers. It also resulted in a massive drop in profits that YNAP has struggled to recoup since.

Mytheresa plans to refocus Net-a-Porter by migrating its operations, along with the latter’s menswear site Mr. Porter, onto Mytheresa’s platform, which boasts capabilities like identifying potential high-spending clients based on browsing activity. YNAP’s off-price division that consists of Yoox and The Outnet will operate separately and remain on the company’s existing platform, Kliger said.

A Refined Sector

Mytheresa’s merger with Net-a-Porter is part of a big shakeout in luxury e-commerce that’s come after years-long shifts in the sector.

The influx of luxury e-tailers in the last 20 years has given brands a range of partners to help grow and consumers several marketplaces with differentiated offerings to explore. But these platforms lost their edge by carrying similar labels and competing on price, causing their margins to suffer and brands to invest more in driving shoppers to their direct selling channels, where they can control pricing and communication with customers.

Still, smaller labels that lack funds to ramp up their DTC businesses remain heavily reliant on multi-brand retailers with a global audience and streamlined logistics to acquire customers and drive sales.

But online luxury could benefit from reduced saturation, where direct competition on price has made it harder for retailers and brands to grow profitably and a return to differentiation, said Stefano Martinetto, founder of brand management firm Tomorrow, which owns popular labels like Martine Rose, Charles Jeffrey Loverboy and A-Cold-Wall.

Luxury e-commerce upstarts, large and small, are already moving toward that goal. Moda Operandi is still where sophisticated luxury shoppers go to pre-order collections; Ssense continues to appeal to younger, fashion-obsessed consumers searching for statement-making pieces from established and emerging brands. There’s also a sector of high-growing and profitable platforms that carry emerging brands that sell exclusively through them, including Garmentory, Cult Mia and Wolf & Badger. These rising marketplaces provide brands with marketing services and let them decide how much discounting they want to participate in.

“Curated multi-brand is the future. It is the mix-match of luxury institutional brands and young independent designers,” Martinetto said. “All of those need one or two opportunities to sell online globally and to reach customers … they don’t need 20, they need two solid players competing on tone of voice and editing and selection rather than pricing.”

Editors' Note: This story was modified on 8th October at 8:15a.m. B.S.T. A previous version of this story stated that Mytheresa was acquiring YNAP for €555 million. That is incorrect. Richemont is transferring YNAP to Mytheresa with a cash position of €555 million; Mytheresa is financing the deal with shares.