Farfetch buys Off-White owner New Guards
Farfetch has acquired the Italian production and holding company behind brands such as Virgil Abloh's Off-White, Palm Angels and Heron Preston.
The $675m acquisition of New Guards Group would augment "Farfetch’s strategy to be the global technology platform for luxury fashion, empowering individuality, and connecting creators, curators and consumers", the global online luxury platform said.
New Guards is a brand platform that has launched a number of global luxury fashion brands, most notably the elevated streetwear brand Off-White, founded by Virgil Abloh who is also artistic director for menswear at Louis Vuitton.
It has built a portfolio of "some of the most culturally relevant emerging brands, designers and creative directors in the sector". New Guards provides the resources and expertise to transform early stage brands into profitable, high growth businesses, which has also driven rapid, profitable growth for New Guards itself.
The New Guards portfolio delivered revenue for the 12 months ending 30 April 2019 of $345 million, with profits before tax of $95 million in the same period. It delivered H1-19 vs H1-18 revenue growth of 59% to $190 million and achieved a gross profit margin of 55%.
Farfetch's board said it believed that the transaction, which will comprise part cash and part shares, would "create significant value for its shareholders, and deliver meaningful benefits to consumers, designers, retailers and manufacturers within the luxury fashion ecosystem and, ultimately, enable the 'Brands of the Future'.”
The London-based, New York-listed company's founder, co-chairman and CEO José Neves said: “The addition of New Guards’ brand platform brings a creative and industrial dimension to our suite of capabilities which, combined with our community of more than 650 boutiques, enables us to power and promote both new and existing creative names in the luxury industry to build the brands of the future.
Jose Neves
"The brands of the future will have three core elements. First, a creative tastemaker able to leverage digital channels to engage a global community; second, best-in-class design, planning and manufacturing; and third, direct-to-consumer global online distribution, complemented by a connected wholesale presence in the most prestigious physical boutiques.
"This is what the combination of Farfetch and New Guards brings to the industry. Together, we can not only continue to develop New Guards’ current portfolio, but will also be uniquely positioned to bring many new talents to life with the combined layers of the Farfetch platform.
"I believe this new dimension of our strategy expands and advances our vision of being the global platform for luxury, at the service of creators, curators and consumers, united for the love of fashion.”
Davide de Giglio, CEO at New Guards added: “We started New Guards Group because we had a vision to build a platform that could support the best creative talent in the world and build iconic brands. Creative visionaries need to be empowered with best-in-class design studios, industrial capabilities and global distribution channels. Farfetch has the technology, expertise and vision to take our business to the next level and unleash the talent of the future.”
de Gilglio will remain as CEO of the business and his co-founder Andrea Grilli will continue as chief commercial officer. The deal is expected to close in the third quarter of this year.
It was announced along with Farfetch's Q2 results in which it reported record gross merchandise value (“GMV”) of $488 million, up 44%, and record revenue of $209 million, up 53%. However pre-tax losses grew from $17.6 million to $89.6 million. At EBITDA level it reported a loss of $37.5 million. Its average order valued dipped very slightly to $600.4m (down from $602.4m) during the three-month period.
Neves said of the performance: “As we approach our one-year anniversary as a public company, I am delighted with our progress in executing on our Chapter 2 vision – to build on our global platform to take the lion’s share of the $100 billion growth expected in the online luxury industry.
"Moreover, the industry has only further validated our global e-concession model over the past year as we have seen major luxury groups increase their direct supply on our Marketplace while at the same time announcing plans to reduce wholesale distribution, and our overall number of brand and boutique partners continued to increase to now exceed 1,100.
"As the only at-scale global marketplace in the luxury industry with a Technology, Data, Logistics, and now an additional Brand Platform layer with our acquisition of New Guards Group, we are uniquely positioned to empower creators, curators and consumers and help uphold the values of an industry we love.”
Farfetch also announced that Andrew Robb has informed the company of his intention to step down as Chief Operating Officer after serving in the position for nine years. Robb will continue on with the company for six months and will help ensure a seamless transition of his responsibilities.
“Andrew has worked passionately alongside me over the past nine years and I am grateful for all he has done to help establish our market-defining position,” said Neves. “We are also fortunate that he will leave us with an incredibly talented and strong team he has built over the years, and he has our sincere thanks for all he has contributed to the Company, along with our best wishes for the future.”
“It is difficult to leave such an incredible company, team and culture at Farfetch,” said Robb. “It has been a true privilege to have been part of Chapter 1 at Farfetch, and I firmly believe in the company’s ability to succeed in Chapter 2 and beyond.”
Farfetch will bring responsibility for its brand, customers and consumer product under a new role – Chief Customer Officer, which will be filled by Stephanie Phair, its current Chief Strategy Officer. Phair is also chairman of the British Fashion Councll.
