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Farfetch Acquires Off-White Licensee to Build Global Tech Platform for Luxury Fashion

Farfetch Ltd. has acquired New Guards Group, the brand platform that’s the exclusive licensee of streetwear brand Off-White, in a cash and stock deal valued at $675 million.

The deal is expected to close in the third quarter of this year, with the cash and stock transaction is expected to be split 50-50.

Farfetch said Thursday that it acquired the company so it can move into design and production and build a global technology platform for luxury fashion. The combined entity, according to Farfetch, will allow the company to leverage its “global consumer base, large boutique network, significant data insights and now expert design capabilities to power the ‘Brands of the Future.'”

“The addition of New Guards’ brand platform brings a creative and industrial dimension to our suite of capabilities which, combined with our community of more than 650 boutiques, enables us to power and promote both new and existing creative names in the luxury industry to build the brands of the future,” José Neves, Farfetch chief executive officer and co-chair of Farfetch, said.

According to Neves, the brands of the future will have three core elements: a creative tastemaker who can leverage digital channels to engage a global community; best-in-class design, planning and manufacturing, and direct-to-consumer global online distribution complemented by a connected wholesale presence in the “most prestigious physical boutiques.”

The marketplace platform said the acquisition underscores the company’s “commitment to making strategic investments in assets that enhance and accelerate its existing strategy,” and it provides value for shareholders and delivers benefits to consumers, designers, retailers and manufacturers within the luxury fashion ecosystem.

New Guards, founded in 2015, has licenses for the streetwear brands Off-White, Palm Angels, Marcelo Burlon County of Milan, Alanui, Unravel Project, Kirin Peggy Gou and Heron Preston. And the brand platform has a history of provided resources and expertise that can help transform an early stage brand into a profitable, high growth business. New Guards owns majority stakes averaging 75 percent in seven popular brands.

“We started the New Guards Group because we had a vision to build a platform that could support the best creative talent in the world and build iconic brands,” Davide de Giglio, co-founder and CEO of New Guards, said. “Farfetch has the technology, expertise and vision to take our business to the next level and unleash the talent of the future.”

Many of the streetwear brands under license to New Guards were already on the Farfetch marketplace via boutiques, with Off-White one of the top 10 most popular brands in terms of gross merchandise value, according to Farfetch.

The company said the transaction will give it the opportunity to develop and introduce new brands to the Farfetch platform, “along with exclusive capsule collections and collaborations to further enrich the consumer experience and boost consumer engagement with the Farfetch brand.” In turn, Farfetch will help New Guards’ existing and future portfolio brands maximize their potential through the opening of new e-concessions on the Farfetch marketplace platform, as well as power each brand’s own e-commerce site.

More interesting is Farfetch noting that the deal can help it promote additional alignment with boutique sellers through a new model of “connected wholesale” where it will tap into near-real-time supply and demand data to match New Guards’ production in a “much quicker cycle.” The move will minimize overstock and strengthen distribution, Farfetch said, adding that it will also reduce the need for markdowns. New Guards already produces “to order,” meaning quantities based on actual orders with paid deposits, and direct-to-consumer sales representing less than 5 percent of revenues.

Separately, Farfetch also disclosed second-quarter results Thursday that saw the marketplace platform widen its loss to $89.6 million, or 29 cents a diluted share, from a loss of $17.7 million, or 7 cents, in the year-ago quarter. On an adjusted basis, the loss was 15 cents. Revenue rose 42.7 percent to $209.3 million from $146.7 million, while gross merchandise value jumped 44.3 percent to $488.5 million from $338.5 million. The company also said it saw an increase of 55.7 percent in active consumers, which reached 1.8 million in the quarter.

During the second quarter, Farfetch added the luxury fashion labels Giuseppe Zanotti, Brunello Cucinelli and Stella McCartney as new direct brand partners. It also grew its boutique network by 45 across 24 countries, including its first partners in Kazahkstan, Monaco and Slovakia. Farfetch said its China region, which represents its second-largest market, continued to see strong growth. The company also completed the integration with JD.com’s TopLife platform in the quarter. JD was an early investor in Farfetch.

The company also highlighted a partnership between Stadium Goods—which it acquired in December—and Sotheby’s, to host an “ultimate sneaker” auction of rare sneakers, including the 1972 Waffle “Moon Shoe” designed by Nike co-founder Bill Bowerman. That pair sold at the July event for $437,500, making them the most expensive sneakers ever sold at auction. And an entire lot of 100 pairs were purchased by art collector Miles Nadal for $1.3 million, Farfetch said.

Farfetch completed its initial public offering nearly a year ago, in September 2018.

Corrected from an early version that named New Guards Group owner of the Off-White brand, when it’s, in fact, the exclusive licensee.

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