Analysts round-up: what to expect from Yoox Net-A-Porter

YNAP has kicked off March by sharing its expectations of a rising adjusted core profit margin for the rest of this year, after reporting core profit was up 17 percent in 2016 with respect to the previous year.

As per its future plans, the luxury e-tailer is about to start trying its butler service – which has been quite a success amongst its high net worth clients in China – in Europe as the company explores the “need to translate the experience of people in shops to our system. We have the best customer service in the world.” The brand would only offer the service to its EIPs, or Extremely Important People, which although just making the 2 percent of its 3 million customers, account for 40 percent of sales from the group’s ‘In Season’ business.

Besides, the group plans to invest 160-170 million euros in technology in 2017. The bulk of the funds will be dedicated to the roll out of a new core e-commerce platform for The Outnet and other online stores.

Considering these data, analysts at Citi called out in a market research that “while reported FY16A numbers broadly matched expectations, YNAP also broadly confirmed guidance for the years to come. And while management said that the group has increased its market share in the online luxury industry (based on industry sources), YNAP guided for 2017E net sales growing 17-20 percent, a slight improvement in EBITDA margin (from 8.3 percent in 2016A) and lower cash absorption (40 million euro in 2016A). All of these metrics are in line with our estimates and should not differ from consensus. Hence, today call should be seen as a relief call.

Analysts concur: YNAP has a challenging yet promising year ahead

But the luxury e-commerce giant has still to overcome some investors’ lack of understanding of the fact “that YNAP’s core business is in the multi-brands stores (89 percent of sales) and not in powering mono-brand stores (11 percent of sales with circa 40 brands,)” highlighted Citi’s analysts following the stock.

“We see 2017 as a crucial year for YNAP to convince investors about the superiority of its business model to that of wannabe competitors. In order to shine, YNAP might need new and important brands for its stores and acceleration in organic growth to have its stock shining again,” concluded Citi in its note.

"In 2016 YNAP consolidated its leading position with a robust performance and growth in profitability," said Chief Executive Federico Marchetti in a statement. YNAP said that adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose to 156 million last year, just above analysts' expectation of 154 million euros. The group said its adjusted net income was 69 million euros, up 16 percent with respect to last year.

JP Morgan stressed meanwhile that the merger between YOOX and Net-a-Porter brought together the two leaders in a fast-growing market with high barriers to entry: “We believe YOOX indeed struck a transformational deal which, in our view, has very strong strategic sense at compelling financial terms. We believe the combined YNAP business can maintain its leading position in the fast-growing, high-end, e-commerce segment, enjoying strong top-line and profits expansion in the next few years and forecast an adjusted EBITDA CAGR of 25 percent over the five years to 2020.”

Morgan Stanley analysis team put the stress on how the “offered no surprises on numbers but presented a long list of initiatives to come through 2017. With growth accelerating into H2 and a sizeable discount to peers, we believe the shares offer a good entry point.”

Image:Yoox Net-a-Porter Group Corporate Web


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