Farfetch make big money move

Luxury online retailer Farfetch have recently acquired Italian fashion holding company New Guards Group in a deal that is reportedly worth $675 million. Farfetch buy New Guards Group; what that means is they now have 100% ownership of the Milan-based Parent company. A parent company that is home to luxury street wear brands like Heron Preston and Virgil Abloh’s Off-White, as well as the Los Angeles-based company Palm Angels, beloved by Pharrell Williams and A$AP Rocky.

Farfetch buy New Guards Group

What does this mean for Farfetch?

When asked, an official spokesperson for Farfetch stated that the major fashion deal will add a “brand platform” layer to the company which will ultimately help build a “brand of the future,” in part by “expanding its capabilities to now include design, production and brand development.” Essentially what this means for Farfetch in layman’s terms is that they will be able to better establish themselves in the fashion world. Not just as a platform but from source. Allowing for their direct-to-consumer global online distribution to shine. New Guards Group takes in $354 million annually in revenue. With Off-White, one of their highest profile brands is already one of the top 10 most popular brands on Farfetch. So cutting out the middle man for them really does have a lot of upside.

Farfetch buy New Guards Group

How will this effect brands like Off-White?

After the deal was made that saw Farfetch buy New Guards Group a representative for Off-White came out to clarify the relationship NGG have with the brand, and therefore the relationship Farfetch will be inheriting. What was stated was that Off-White LLC is and will continue to be controlled by Virgil Abloh, while he also owns the trademark of the brand. NGG’s role is as their exclusive licensee pursuant to a multi-year agreement. What this means is that the New Guards Group transaction with Farfetch will not affect Off-White day-to-day operations as the New Guards Group team will become part of Farfetch.

Farfetch buy New Guards Group
Stock down by 40% following deal that saw FArfetch buy New Guards Group

In response to the deal Farfetch stock has dropped nearly 40%, falling from 18.25 USD per share to $10.10 USD in just under an hour and 20 minutes. With analysts suggesting that the cause of this could be down to an apparent shift in strategy from Farfetch. Something that may have unsettled some investors who would have initially bought into the company’s “asset-light” approach. With this acquisition Farfetch has become more of a conglomerate than a single entity. Meaning that investors have to account for all the moving parts, including the activities of the New Guards Group and Stadium Goods of which Farfetch acquired back in December 2018.

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