YNAP's full-price units have strong Q1 but off-price is slower

As Yoox Net-a-porter Group prepares for a new life under the control of Richemont, it reported what should be its last set of separate company results on Monday. And while revenues moved up only 0.5% to €518 million on a reported basis, within that small change there were certainly some impressive figures, even though the off-price part of the business was sluggish.


Net-A-Porter


The company said that sales rose almost 8% at constant exchange rates and CEO Federico Marchetti was “very pleased” as key units within the group outperformed.

Importantly, the company’s move into hard luxury seems to be going well with plans to open a Mr Porter companion hub to match that introduced in April for fine jewellery and luxury watches on Net-A-Porter.

Meanwhile YNAP also said that its in-season channel saw sales rising 14% and it's online flagship stores, which it operates for a number of major designer names including Armani, Valentino and Isabel Marant, rose over 20%.

THE NUMBERS

So let's look a little closer at the details. As mentioned, revenues may have only edged up slightly in the first three months of the year, but they were much healthier with exchange rates factored-out. 

The company said that its organic growth (that is, its gross merchandise value) was 10.4% with a positive organic performance across all business lines. 'Multi-brand in-season' net revenues (ie Net-A-Porter and Mr Porter) were up 14.1% to €282.3 million and they accounted for 54.6% of total group sales compared to 51.8% a year ago. 

The two luxury sites benefitted during the quarter from exclusive deals such as Balenciaga capsule collections and the Fendi FF capsule collection, plus Mr Porter’s exclusive capsule with Prada, the label’s first menswear exclusive with an online retail partner. And that 'hard luxury' move, the Fine Jewelry & Watch Suite, also helped.

But 'multibrand off-season' (the discount sites Yoox and Outnet) saw net revenues up only 2% on an organic basis to €183.3 million. And they dropped 4.6% on a reported basis while the unit saw its share of total group sales dropping to 35.4% compared to 37.3% a year ago. 

The performance reflected the fall in The Outnet’s customer retention rate mainly due to “low product availability” in Q4, as well as reflecting the impact of a pricing strategy “designed to mitigate the severe currency headwinds on Yoox.” 

But both off-price brands boosted their product assortment with Yoox launching See by Chloé and Polo Ralph Lauren pop-up stores while The Outnet further expanded its shoe category. In April, The Outnet also started the rollout of its international expansion with launches in the Middle East and Japan. 


Mr Porter


Back with in-season merchandise, YNAP said the gross merchandise value of the 'online flagship stores' it runs for designer labels rose 21.8%. And while this unit only accounted for 10% of sales compared to 10.9% last year, that was clearly because of faster growth in other parts of the business rather than this unit underperforming. 

Over the quarter, the unit saw the new Ferrari e-store launching in Europe, the US and Asia Pacific. The store was launched on the new front-end platform with a new mobile-centric interface equipped with personalisation capabilities. 
And in February, the existing partnership with Armani was further extended. Specifically, the A|X Armani Exchange brand, previously active in North America and Europe, was extended to Japan. 

INTERNATIONAL OUTLOOK

This is clearly a business with a massive international focus and that focus certainly paid off in Q1. YNAP said Italy, North America and Asia Pacific, were the fastest growing regions, although the group recorded positive growth at constant currency across all of its key markets.

The UK ended the quarter with net revenues up almost 6% at constant exchange rates, Italy rose 10.4%, while top market North America was up 8.5% (although it was down 5.1% on a reported  basis due to exchange rate effects). European Q1 revenues, excluding Italy and the UK, were up 4.3%. Meanwhile Asia-Pacific rose 13.4%, mainly driven by Hong Kong and Japan. 

And during the period the company saw 245 million visits to its sites overall, compared with 200 million in the first quarter of 2017, and 2.4 million orders, compared to 2.2 million. But the average order value dipped. It was €314, or €339 at constant exchange rates, compared with €343 in the first quarter of 2017 as currency effects weighed on the figures. However, the fact that the company had 3.2 million active customers compared with 3 million a year ago more than made up for that dip.

For the future, the company expects annual results in line with its plan and should spend around €170 million to €180 million on future-proofing itself. Spend will be focused on the new omni-stock set-up and ongoing development of the new shared technology platform. 

“A strong focus will be placed on mobile innovation and on the rollout of localisation and omnichannel features,” it said. The group also plans to expand its operations with the opening of a new in-season hub in Milan and additional space at the Interporto logistics site in Bologna.

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