Shares of luxury e-commerce retailer Farfetch Ltd. FTCH
up 11.1% in trading on Friday after announcing a partnership with Alibaba Group Holding Ltd. TORTOISE
and Cie. Financière Richemont SA CH: CFR
including the Chinese market expansion and $ 600 million investment.
Richemont brands include Cartier, watch maker Piaget and fashion brand Chloé.
It was previously reported that Alibaba will invest in Farfetch.
Farfetch will launch shopping channels on Tmall Luxury Pavilion, Tmall Global and Luxury Soho, reaching 757 million consumers.
Read: Richemont jumped on the results, partner Alibaba
Alibaba and Richemont will invest $ 300 million each in Farfetch. The investment will be through the purchase of 0% convertible premium bonds issued by Farfetch. Alibaba and Richemont may ask Farfetch to buy back all or some of the notes by June 30, 2026 for the full price.
Alibaba and Richemont will also invest $ 250 million in a new joint venture, Farfetch China, which holds a 25% stake. The two companies will also have the option of receiving another 24% of the combined shares in the joint venture after the third year.
These investments are expected to end in the first half of 2021.
Daniel Zhang, chief executive of Alibaba, said: “The Chinese luxury market – which is expected to account for half of global luxury sales by 2025 – includes hundreds of millions of young consumers. , digital native, ”Daniel Zhang, chief executive officer of Alibaba, said in a statement.
Artemis, an investment company founded by François-Henri Pinault, chief executive officer of luxury fashion company Kering FR: KER,
also increased Farfetch’s investment by $ 50 million.
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Kering brands include Gucci, Saint Laurent and Alexander McQueen. Artemis is a controlling shareholder at Kering and owns a variety of other companies including Christie’s auction house and Chateau Latour vineyard.
José Neves, CEO of Farfetch, said: “New initiatives with Alibaba Group and Richemont expand Farfetch’s strategy to drive digital transformation across the luxury industry. , which has been accelerated by unprecedented challenges from the COVID-19 pandemic. .
All companies will work together to continue to develop the luxury New Retail Initiative, which aims to create solutions that include e-commerce websites and apps for premium brands.
“The growth potential of luxury e-commerce has never been promising and China’s importance to the luxury industry is becoming clearer,” Pinault said.
The news comes as Amazon.com Inc. AMZN
also a digital flagship in the online luxury business with the launch of the Luxury Store, launched with Oscar de la Renta on an invited-only basis in September.
“With Farfetch’s strong fundamentals belatedly demonstrating and lucrative opportunities from the Chinese venture, Farfetch’s long-term growth opportunities are becoming clear,” Wells Fargo analysts wrote. than”.
Furthermore, Wells Fargo emphasizes the potential for growth in the online luxury space.
“[D]Emographics have been somewhat unfavorable for online adoption (due to the aging customer base), but now the tech-savvy millennia are amassing wealth, making inroads online for The luxury industry will accelerate, ”said analysts.
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Wells Fargo notes that the online luxury market could reach $ 112 billion in revenue by 2025, up from $ 28 billion currently.
However, analysts note that as travel continues after COVID-19, luxury shoppers are likely to return to stores, which raises the question of online luxury shopping. how much will continue. This could hurt Farfetch.
Wells Fargo rates Farfetch’s stock weight equally with its $ 42 price target.
Farfetch shares have soared more than 300% this year. Alibaba grew 41.2%. And Richemont shares, which rose nearly 9% in Friday trading, fell 9.2% for 2020.
Online retail amplification ETF IBUY
has increased by more than 96% by 2020 and the S&P 500 standard SPX index
an increase of 8.5%.