Mytheresa, the luxury e-commerce firm, plans to focus on global expansion to take on competitors like Farfetch, says chief executive officer Michael Kliger. The company’s valuation surged to $3 billion on its first day of trading Thursday.
The shares, which Mytheresa increased in price from $16 to $26 ahead of listing amid investor demand, closed the first day at $31. Mytheresa raised $407 million selling 15.6 million shares. The proceeds will be used to repay debt stemming from bankruptcy proceedings for Neiman Marcus, from whom it was spun off ahead of the US department store group’s Chapter 11 bankruptcy proceedings last year, out of which it emerged in Autumn 2020.
Mytheresa is among a wave of e-commerce listings taking advantage of the pandemic-related pivot to online, including resale platform Poshmark, which surged 140 per cent on its first day of trading. The Munich-based luxury retailer of brands like Bottega Veneta and Prada sets itself apart through its niche product assortment, offering exclusive pieces and a curated collection. That’s driven net sales of €450 million in the last fiscal year, a 18.6 per cent increase.
While rival Farfetch still eyes profitability and Richemont’s online distributors division, which includes Net-a-Porter, reported a widening operating loss in 2020, Mytheresa’s online business “has always been profitable”, says Kliger. He told Vogue Business he expects growth to continue between 20 and 25 per cent a year, with 60 per cent of revenues in Europe. Brand recognition in the US and Asia is “still low”.
“Our profitability is a big part of the feedback from investors and why they want to invest,” says Kliger. Mytheresa traces its roots back more than 30 years to a luxury store in Munich, launching its e-commerce business in 2006 and now carrying more than 250 brands. “When you create a platform you have the opportunity to edit, and it makes you more attractive if you get it right.”
“Nothing about this situation was normal. It was spun off from a company that subsequently filed for bankruptcy so it’s unprecedented and I think they just want to untangle themselves completely and finally,” says Gary Wassner, CEO of fashion-focused financial services firm Hilldun. “You don’t want to have debt and I think they’re just trying to be a bit more of an attractive asset again,” adds Jessica Ramirez, retail research analyst at Jane Hali & Associates.
Online penetration of the personal luxury goods market is expected to grow from 12 per cent to over 30 per cent from 2019 to 2025, according to Bain. Mytheresa, which still operates two physical stores in Munich, had more than half a million active customers at the end of September 2020, up 24.3 per cent from the previous fiscal year. It shipped over one million orders to 133 countries in its past fiscal year, according to its IPO prospectus.
Mytheresa faces both opportunities to expand globally as well as challenges ahead. It doesn't currently stand out on key performance metrics, wrote Bernstein analyst Luca Solca. “In terms of geographical distribution, Mytheresa is predominantly a European player. Its average price is middle of the road, and significantly lower than Net-a-Porter or MatchesFashion. Its customer acquisition costs are significantly higher than Farfetch’s per active customer. He added that daily active users were “very significantly behind” Farfetch and Net-a-Porter, although spent a comparable average session per day. And despite sustainability becoming an industry buzzword, the retailer also lacks a sustainable edit, which is promoted by other competitors, Solca said.
Mytheresa is betting its curated collection will set itself apart. Of the 7,000 unique styles the company had on hand in December 2019, just 21 per cent overlapped with other online luxury retailers, according to an internal review. “These are very attractive to Chinese consumers who are interested in finding products that are not available everywhere,” says Kliger, adding that the company’s focus is on customers who shop 16 times per year and spend more than €15,000 a year. More than 65 per cent of net sales in its latest fiscal year came from customers who had shopped with Mytheresa in the past.
Marketing, PR and events in the US and Asia are planned, as well as more personal shoppers set up in key regions like China. Mytheresa launched a Mandarin version of its website in 2016, and ran its first brand ambassador campaign in China last year with Chinese actress Cecilia Song. It faces competition from Farfetch, which has its sights set on China and recently announced a tie-up with Alibaba and Richemont. “There’s still a lot to do, and we are investing in building up our teams who have a real understanding of the desires of Chinese consumers,” says Kliger.
Opportunity in the US will be just as great, says Wassner. “I don't think Mytheresa has a very wide and long runway in the US since it has been so European oriented. The US has been an untapped market so an IPO probably is appropriate in that there is a significant opportunity for growth here. If they do that properly, there’s a wide open playing field for them since they are not as obvious as their competitors here.”
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