Coupang to Rescue Farfetch, Injecting $500 Million Into Troubled Firm
LONDON — Farfetch has found its rescuer in Coupang, which has agreed to pump $500 million in emergency funding into the company as part of a “pre-pack” administration process.
According to Farfetch, the fresh capital will allow it “to continue providing exclusive brands and boutiques with bespoke, cutting-edge technology and giving leading designers access to consumers around the globe.”
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Coupang, which invested alongside the San Francisco-based firm Greenoaks Capital, is a Fortune 200 company listed on the New York Stock Exchange. It has operations and support services in markets including South Korea, Taiwan, Singapore, China and India.
In its home market of South Korea, Coupang has become part of everyday life, offering home delivery for everything from groceries and take-away orders to consumer goods.
It compares, albeit on a smaller scale, to Alibaba in China and, according to industry sources, has been looking to move upmarket into fashion and luxury goods services.
A statement from Farfetch said that Coupang’s “operational excellence and innovative logistics combined with Farfetch’s leading role in the luxury ecosystem will drive exceptional experiences for customers, boutiques and brands” worldwide.
“Farfetch is a landmark of the luxury landscape and has been a transformative force in demonstrating that online luxury is the future of luxury retail,” said Bom Kim, founder and chief executive officer of Coupang.
He added: “Farfetch will rededicate itself to providing the most elevated experience for the world’s most exclusive brands, while pursuing steady and thoughtful growth as a private company. We also see tremendous opportunities to redefine the customer experience for luxury clients everywhere.”
José Neves, founder, CEO and chairman of Farfetch, said, “Coupang’s proven track record and deep experience in revolutionizing commerce will enable us to deliver exceptional service for our brand and boutique partners, as well as for our millions of customers around the world.”
As part of the deal, Farfetch will be pulled off the New York Stock Exchange and taken private, while shareholders, including Neves, will see their investments wiped out.
Neves will remain with the company, which will be fully controlled by Coupang.
A source close to Farfetch said that, going forward, it will be business as usual for suppliers, customers and partners.
Richemont’s pending deal to sell a majority stake in Yoox Net-a-porter to Farfetch and Alabbar has been terminated as a result of the takeover.
Under pre-pack administration in the U.K., a rescuer for a troubled business is found and a sale is negotiated before the administrators step in. In a normal administration, a company is declared insolvent, and it’s up to the administrators to seek buyers for the business.
The fate of Farfetch’s many assets — in particular Browns, New Guards Group, Stadium Goods, Farfetch’s $200 million stake in Neiman Marcus — remains unclear. It is understood there are ongoing conversations with potential buyers regarding Browns and New Guards Group.
Over the past weeks, as Farfetch struggled to secure a white knight, two of its biggest commercial partners, Compagnie Financière Richemont and Alibaba, both kept their distance and made clear they were not interested in rescuing the company.
Richemont said it would not invest in the ailing Farfetch, while Alibaba had been willing to put money in, but did not want to buy Farfetch outright.
Richemont said last month it was “reviewing its options in respect of its arrangements with Farfetch,” and stressed that its maisons and YNAP had not yet adopted Farfetch Platform Solutions, part of a wider deal forged with the fashion platform in 2022.
Farfetch has a separate partnership with Richemont and Alibaba, for distribution in China. Last week, the Chinese e-comm giant’s president Mike Evans resigned from Farfetch’s board.
Many believe tech expertise remains Farfetch’s superpower, and will continue to be the core of the business going forward.
Neves has always been proud of the platform he founded, which offered technology allowing large and small specialty stores to sell to the world. In addition, Neves and his team also worked with brands and retailers helping them unpick data, gauge consumer demand, and build stores that could meld physical and digital retail.
Farfetch’s original model of marketing retailers’ fashion and processing orders, but not holding stock, was considered clever and cutting edge, and Neves originally attracted investment from across the fashion community, from Chanel to Condé Nast to Artémis, the investment arm of France’s Pinault family, which invested multimillions in Farfetch’s Class A shares at the time of the IPO.
The CEO seemed particularly adept at securing partnerships and cutting deals.
A year ago, Farfetch seem poised to take a major step forward with its agreement to take the wheel at YNAP as part of a wider plan that would have also seen Farfetch apply its Platform Solutions tech to some of the Richemont brand sites.
But the business continued to vex Wall Street.
Last December, Neves returned to New York for the company’s first capital markets day since going public in 2018.
“Farfetch is at the tipping point,” the CEO said. “We’re at the point where we’re going to start to leverage the investments of the past 14 years to continue on the path of growth, profitable growth and cash flow generation. And today is all about providing clarity to you on the building blocks of that roadmap.”
Many didn’t like what they saw. Shares of Farfetch fell by more than 35 percent that day, and while at least some analysts remained bullish on the thesis behind the company, the road ahead seemed longer than generally expected.
The money-losing operation bounced back some after that, but never really regained its traction on Wall Street.
Experts attributed a big part of that to a series of what many saw were as non-core acquisitions that complicated the business.
Over the years, Farfetch’s buying spree included London retailer Browns, New Guards Group and Stadium Goods. Farfetch became a retailer that held stock and managed inventory.
The luxury fashion platform also made a splashy its move into beauty, acquiring Violet Grey and tapping founder Cassandra Grey as an adviser. The deal was followed by a broader rollout of beauty in April 2022, when more than 100 prestige brands launched on the marketplace.
In August, Farfetch abruptly said it was exiting the beauty category.
At the time, Neves told WWD: “This company was built from zero, from nothing, and actually launched in 2008, amid a global financial crisis.
“We got our first venture capital money in 2010, so the first three years were just my money, which was no money. And so we really have that DNA of resiliency and frugality and we’ve grown this business from those humble, very humble origins to be a global platform present in all large luxury goods markets in the world.…The North Star of this company remains absolutely intact, which is to be the global platform for luxury,” he said.
But investors have not kept the faith. Farfetch’s market capitalization dipped below $250 million this past week as the company was said to be speaking with administrators — a long way from the $25 billion it nearly hit in 2021.
Ultimately, the company’s cash burn seems to have just too much for equity investors and the firm’s debt came to the fore.
Earlier this week, Moody’s Investors Service lowered its credit rating of Farfetch deep into junk territory, moving the company to “Caa2” from “B3,” and put Farfetch on review for a further downgrade. Standard & Poor’s had already cut its rating on the luxury platform earlier in the month.
— With contributions from Tianwei Zhang (London)
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