Mytheresa CEO Michael Kliger on why buying YNAP makes lots of sense

Mytheresa acquired YNAP this week from Richemont, and in return the Swiss-based luxury giant acquired 33% the German-based luxury e-tailer. Here’s CEO Michael Kliger explains on why he thinks the deal makes lots of sense.
 

The transaction is the latest move in the sometimes-tortured history of YNAP, a pathbreaking luxury e-tail platform that has consistently struggled to make money. Indeed, Richemont admitted in its release that it “currently expects the write down of YNAP net assets to amount to approximately €1.3 billion.” Though this includes the €555 cash position left in YNAP after the sale.
 
Despite YNAP many loss-making years – albeit with hints of tiny profits of late – the market reacted with huge enthusiasm to the acquisition. Boosting Mytheresa’s stock price by 57% by the end of Monday, and a further 12% today.

A clear vote of confidence in the management of Mytheresa, one of the few high-end e-tailers that has regularly achieved double digit sales growth and profitability.
 
The deal creates a seriously hefty group with some €4 billion in annual revenues. So, we spoke to its famously self-confident CEO Michael Kliger to hear why he thinks this will all work out very well.
 
Fashion Network: Why did you acquire YNAP?
Michael Kliger: With this transaction, Mytheresa aims to create a pre-eminent, multi-brand, digital, luxury group worldwide. Mytheresa, Net-A-Porter and Mr Porter will offer differentiated but complementary multi-brand luxury edits based on curation, inspiration and outmost customer service. The three brands will share a large part of their infrastructure creating synergies and efficiencies while maintaining their different brand identities. The off-price business will benefit from the separation from luxury and a much simpler operating model driving growth and profitability. We believe that this transaction will create significant value for our shareholders, brand partners and most importantly for our high-end customers.
 
FN: Why do you think you can make it profitable when many other managers have struggled to do that?
MK: We bring unique capabilities and assets. Mytheresa is an industry leader in the online luxury market and possesses technical infrastructure, resources and expertise from which Yoox Net-A-Porter will benefit.
 
FN: What do you see as the mistakes that were made that need to be corrected?
MK: We believe one of the root causes of the struggles and problems has been high complexity. The aim is to create a global, digital luxury platform across multiple distinguished brands. Multiple brands allow us to cover the market with differentiated positionings including brand portfolio, customer and geographical focus.
 
FN: What do you see as the synergies?
MK: Mytheresa has demonstrated its operational excellence and the ability to seamlessly execute large-scale projects in recent years. The proprietary Mytheresa technology platform will be the basis for the integration of Yoox Net-A-Porter. Significant synergies exist by combining the back-office operations of the luxury brands.
 
FN: What do you intend to do with the €100 in revolving credit?
MK: That’s for seasonal working capital needs.
 
FN: How long do you think it will take to make the total business profitable?
MK: We intend to make the total business profitable in 3-4 years.
 
FN: Right now, Mytheresa, Net-A-Porter and Mr Porter compete for many of the same brands and customers. How do you decide who gets what?
MK: Mytheresa, Net-A-Porter and Mr Porter will offer differentiated, but complementary, multi brand offering for luxury customers.

 
FN: A key element with Mytheresa is your personalized treatment of key clients. And the cool events you organize. Do you plan to do something similar with Net-A-Porter and Mr Porter?
MK: Each serve their customers and need to do what they do best for those.
 
FN: Where will Yoox and The Outnet fit into this project?
MK: Yoox and The Outnet are a perfect fit but as a standalone business. It is the same as any major luxury brand’s outlet business, it serves a different customer.
 
FN: As you will share infrastructure, how many redundancies do you expect?
MK: It is premature to discuss operational details before closing the deal.