Within the $70 billion luxury market, Mytheresa sees “a huge opportunity” to take a bigger piece of the pie, Michael Kliger, the chief executive officer of Mytheresa, said.
And not just via the acquisition of the much larger Yoox Net-a-porter business. Mytheresa itself, asserted Kliger, “is not maxed out.”
“At the moment, the market has changed, but our view is, it’s a cyclical industry, and if I look at our numbers, we feel the worst is behind us,” Kliger told WWD just after Mytheresa on Monday confirmed the company was acquiring Yoox Net-a-porter, also known as YNAP, following media reports last week that a deal was imminent.
“We are the strongest player. We have seen a lot of opportunities to engage with different companies. We believe YNAP is a great company, and this combination resolves what always was a challenge for us — to cover more space in the market,” Kliger said.
Within its own space, “Mytheresa has been hugely successful because we are very specific, ultra luxe, and highly curated,” Kliger said. “We don’t want to give that up because we can still grow with that.” But he also said that to cover more of the market and be more relevant in the market, it’s important to expand the portfolio with additional brands.
Net-a-porter, Mr Porter and Yoox Kliger described as being highly differentiated, with different assortments, different marketing and brand identities from Mytheresa, while also complementary to Mytheresa. They represent “a great opportunity to increase breadth without losing depth,” Kliger said.
Within luxury e-commerce, Mytheresa, he said, has the highest share of runway styles from the fashion shows. “We pick a higher share than anyone else. So as a brand, our positioning is much more ultra luxe, much more curated. We only carry 250 women’s brands. The positioning of Net-a-porter is also luxury, but includes accessible luxury. Net-a-porter has about 800 to 1,000 brands, so they also attract aspirational customers. They include up-and-coming new brands which for many customers is very exciting. We don’t do this because it would go counter to our very selective approach. It’s a different positioning.”
Kliger did acknowledge that many of the labels that Mytheresa sells are also sold on Net-a-porter. However, “the selection and curation matters,” Kliger said. “What we pick from the Gucci collection or what we pick from a Valentino collection is different and should be different from what the buyers of Net-a-porter select. It’s the duration, the inspiration, and the brand identity — that’s the difference.”
Kliger said brand equity, customer base and brand loyalty are “super strengths” of YNAP. “Net-a-porter, Mr Porter and Yoox are pioneers in the industry. But they have back-end problems and they have technology problems, and we believe we have a strong answer to that,” Kliger said. “One of the fundamental problems of YNAP was that they tried to operationally bring together things that I don’t believe belonged operationally together. They [deal] with huge complexity by managing off-price and luxury on the same processes, on the same infrastructure, trying to serve all those needs. Even the White Label business has been served by the same infrastructure, same warehouses, and the same technology.”
Mytheresa plans to separate the off-price and regular-price businesses by bringing the operations of Net-a-porter and Mr Porter into the Mytheresa infrastructure because it’s a luxury infrastructure, Kliger said. “It fulfills the needs of luxury businesses.”
YNAP’s off-price business will have with its own infrastructure and processes, he added. “We’ll make them leaner because their requirements are actually much less than the luxury business. The off-price business will have a much simpler operating model to bring it back to higher profitability and higher growth…While on the front end, the YNAP brands are valuable — we don’t want to weaken them, we actually want to strengthen them — the back end is where there’s been too much complexity creating too much cost which did not fulfill the specific needs of the different businesses. That’s our view. That’s what we will focus on in what will be quite a significant transformation of the back-of-the house operations [involving] infrastructure, technology and processes.”
Kliger also told WWD that the buying teams of Mytheresa and YNAP will not be combined to ensure the brand identities and assortments are kept distinct.
Asked if the deal would lead to staff consolidation of any kind, Kliger said it was too soon to discuss anything specific on that front.
Under the terms of the deal, Mytheresa gains 100 percent of YNAP, the 555 million euros YNAP had on its books, YNAP’s 100-million-euro credit facility for seasonal working capital needs, and no debt. For all of that, Richemont will receive 33 percent of Mytheresa through a new stock issue. Richemont will also get a seat on the Mytheresa board, but will have no operational role in the company.
“To have Richemont behind us is great. It’s one of those companies that really understands luxury,” said Kliger.
The deal, which is expected to close sometime in the first half of next year, creates a combined business generating 3 billion euros in gross merchandise value, with Mytheresa accounting for 914 million euros in GMV, Net-a-porter, 1.2 billion euros, and Yoox, 900 million euros.
Mytheresa’s stock closed Monday up almost 57 percent at $6.76 on the NYSE.
Kliger was adamant that bringing additional brands to the portfolio through the deal should not be interpreted as a sign that Mytheresa has limited growth prospects. “We already guided that for this fiscal year, which started in July, we expect 7 to 13 percent growth, and 3 to 5 percent EBITDA [earnings before interest, taxes, depreciation and amortization]. In the medium term, the Mytheresa business will go back to growth in the high teens with high-single-digit adjusted EBITDA margin.
“After closing the deal, I want the brands to continue to compete but within their positioning, and not gravitate to the same positioning,” Kliger said. “I want the Net-a-porter buying team to fight hard to get the best fashion pieces and create the best activations for their customers. And I want the Mytheresa team to do that too,” but it will all be under one corporate umbrella with Mytheresa, Net-a-porter, and Mr Porter sharing a large part of the administrative, technology, payments, and customer care functions, among others. There will be efficiencies, but also he sees pooling expertise from Mytheresa and YNAP will be another benefit of the acquisition.
“We are quite uniquely positioned to support this transformation, because we have our own proprietary e-commerce stack that our teams designed and developed. It launched last April. It’s fully scalable,” Kliger said.
Kliger also noted that Net-a-porter has a warehouse in the U.S., in New Jersey, while Mytheresa does not have a U.S. warehouse. “One of the options could be to leverage that,” he said.
Asked if being a smaller company makes it challenging to absorb a much bigger one, Kliger replied, “Whether the other company is big or small, it’s always a challenge in these integrations. So it’s not necessarily about size. The number of packages they ship is not defining or challenging the integration. We are not ‘absorbing’ Net-a-porter and Mr Porter because to do that would kill the very assets we are keen to get. We are trying to bring the back end together, but the banners, the storefronts, will continue to be separate.”
