Updated 4:59 p.m. ET Sept. 25
The half-mad and mixed up world of luxury e-commerce has always had more than its fair share of strivers — from Net-a-porter and Matches to Ssense and Farfetch.
But it was Munich-based Mytheresa that managed to actually move forward and build a business that can generate cash.
Now Michael Kliger, who has led Mytheresa for a decade, has to do it again as chief executive officer of LuxExperience, the company that came together when Mytheresa took control of Yoox Net-a-porter in April.
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LuxExperience gave a very early read on the combination Thursday when it reported results for the fourth quarter ended June 30.
As expected, the trend lines of its three business units — Mytheresa, Net-a-porter and off-price — have not changed yet.
The Mytheresa division continued to do well last fiscal year, pushing sales up 9 percent to 916 million euros as the average order value increased by 10 percent to 773 euros. Gross profit margins expanded by 130 basis points and earnings before interest, taxes, depreciation and amortization tallied 45 million euros.
Those numbers stand out in what has been a down cycle for most in luxury.
“We couldn’t be happier with the performance of Mytheresa,” Kliger told WWD in a virtual interview from Milan, where he was attending Milan Fashion Week. “It is important that in our Mytheresa legacy business, as we may call it, we clearly confirm that ability to make money and grow in digital luxury.”
Now the company just has to replicate that growth at Net-a-porter and off-price, which includes Yoox.
Over the past year those two businesses have seen “shrinking revenue and negative EBITDA — but nothing surprising, nothing exceptional,” Kliger said.
Investors traded shares of the company up 3.1 percent to $8.42 on Thursday, leaving it with a market capitalization of $1.1 billion.
LuxExperience picked up Yoox Net-a-porter, 555 million euros and a 100 million-euro credit facility from Compagnie Financière Richemont in return for a 33 percent stake in the company.
That put Kliger on a mission to bring what’s worked at Mytheresa to the other businesses.
“Leave it to the experts,” Kliger said, projecting confidence. “Strategy is one thing, but the real thing is execution. We know how to deliver a business model that can operate with 14 percent instead of 22 percent [selling, general and administrative expenses].
“We have IT for luxury that works and doesn’t cost the zillions that they pay,” he said, referring to one of YNAP‘s stumbling blocks. “We have warehouses that run. It doesn’t diminish the work that needs to be done. But we are not coming in here naively. We know the task, but also we come in with tons of expertise.
“This is not nuclear science,” he said. “We buy products and sell them. Retail is simple as a business. At the executional level, it’s of course very complicated because you talk about many transactions, many different products. You can lose it in the detail, but also you should not make it look or actually make it more complicated than it is. I think YNAP has failed in the past making things too complicated. It’s simple: Customers want a great edit, they want it fast and once they’ve bought, they want ideally flawless execution.”
The Mytheresa treatment that Net-a-porter is now implementing has the merchant:
- Focusing on the top customers who spend the most — 43 percent of Mytheresa’s business comes from just 3.8 percent of its customers.
- Amplifying full-price and high-item values. “We really believe full price is the only way to be sustainable,” the CEO said. “We have markdowns, seasonal markdowns [at Mytheresa], but we have a much higher full-price share than the other business.”
- Being frugal on everything the customer doesn’t see.
And then everything the customer does see will be strengthened, Kliger said.
“We will increase marketing spend for these companies,” he said. “We also invest more in attractive merchandise. That’s where we’ll spend money to fix the business.
“We need to convince customers to shop with us by inspiration, not by discount,” Kliger said. “If you do that, you can only keep them by discount and then it’s not a sustainable financial model. Net-a-porter was not the worst offender. The worst offenders have gone bankrupt. So we haven’t acquired a company that went too far, but there’s fine tuning there in the assortment and the marketing and, of course, we will leverage the strengths of Mytheresa in operations [and] in finance.”
All together, the three businesses for all of last year drove sales of 2.75 billion euros with an adjusted EBITDA margin of negative 2.1 percent.
This coming year, LuxExperience is looking for 2.5 billion euros to 2.9 billion euros in sales and an EBITDA margin of anywhere from down 4 percent to up 1 percent.
“My moderate bullishness does not include wars, trade wars, currency meltdowns,” Kliger ticked off. “Any of that can change the story again. Therefore we stay prudent. We stay very flexible in what we do, but what we know now is there’s a good outlook.”
While the large brands are all in the process of building out their own direct connections with consumers through stores and websites, LuxExperience continues to be a major and stable outlet for many designers.
And Kliger stressed the company’s financial stability and its approach to paying brands.
“Our policy has always been, pay as fast as you can, not because we are altruistic or whatever, but the logic of paying fast is you get delivered fast,” he said. “Our customers want the latest and the newest and they shop where they find it. We can pay in 30 days, 15 days, no problem. We are not a bank. We don’t want to sit and save cash. We are a retailer. We want to have merchandise to trade.”