Farfetch splashes out GBP 556 million to acquire Off White amid widening losses

By guest author Elias Jahshan from Retail Gazette

  • Farfetch buys New Guards, operator of streetwear brand Off-White, for $675m ($556m)
  • Off White was founded by Virgil Obloh, the current artistic director of Louis Vuitton
  • Farfetch shares plunged by over 40 per cent, marking an all-time low for the online retailer
  • Farfetch also posted widening losses for the second quarter

Farfetch has acquired New Guards Group, the firm that operates luxury streetwear brand Off White, for USD 675 million (GBP 556 million) amid widening losses in its second quarter.

The deal means Farfetch now has a stable of directly-owned fashion fashion brands that it can launch on its online marketplace platform.

New Guards Group is a Milan-based holding company founded in 2015 that has launched a handful of luxury streetwear brands, including Off-White, Palm Angels and Heron Preston.

Off White is best known for being founded and led by Virgil Abloh, who is also the artistic director for Louis Vuitton.

In the UK, Off White trades with consumers directly via its own website and through concessions at Harrods, Selfridges and Harvey Nichols.

Farfetch acquired New Guards in a cash-and-stock deal, with the $675 million price tag being twice the group’s annual revenue and seven times its earnings before taxes.

The deal is expected to close in the third quarter of 2019.

Farfetch said it plans to grow the New Guards brands’ distribution through directly-operated retail stores and directly-operated ecommerce sites.

New Guards co-founder Davide De Giglio will remain in the role of chief executive, and Andrea Grilli will stay on as chief commercial officer.

The news sent shares in Farfetch plunging by 40 per cent in after-hours trading in New York, marking an all-time low for the London-headquartered retailer.

It is not the first time investors have shown concern in luxury online marketplace, which has recorded widening losses amid a growing investment in technology, infrastructure and partnerships with global brands and retailers.

Farfetch currently has partnerships in place with the likes of Mulberry, Burberry, Chanel, Net-A-Porter and China’s JD.com.

Farfetch’s Black & White Solutions division also struck a deal with Harrods to offer a new and improved global ecommerce platform for the iconic department store.

Farfetch also owns London’s iconic luxury fashion retailer Browns, which means it has a permanent foot in bricks-and-mortar retail.

On August 8, 2019 Farfetch reported second-quarter revenue of USD 209.3 million (GBP 172.4 million), a 43 % surge year-on-year, while gross merchandise value jumped 44 % to USD 484 million (GBP 388 million).

However, losses after tax widened from USD 17.7 million to USD 89.6 million (GBP 73.8 million).