Yoox Group - CFA Society Italy

Transcription

Minerva Capital
Yoox Group
Minerva Capital
YOOX GROUP
The Global Internet Retailing Partner for Leading Fashion & Design Brands
Market Data
52 weeks
price range
(EUR)
Average daily
volume
As % of
shares
outstanding
52 weeks
STD Dev
Beta
Shares
Outstanding
% Floating
32.06 - 11.85
Main
Shareholders
as of
07/02/2014:
Marchetti
Federico
7.06%
Oppenheimer
Funds 6.18%
Red Circle
INVM SRL
4.99%
1.73 billions
of Euro
173%
Market
Capitalization
52w CAGR
265883
Date: 08/02/2014
Recommendation: HOLD
Ticker (Bloomberg): YOOX:IM
Retail, Consumer Discretionary
Price (EUR): 29.88€
Price target (EUR): 29.97€
0.46%
HIGHLIGHTS
47.82%
0.89
58,308,276
78.55%
CAGR from
IPO
BV per share
(EUR)
ROE
525%
12.30%
P/BV
P/E
Sharpe Index
17.57
151.36
3.58
1.97
We issue a HOLD recommendation with a target price of 29.97€. Yoox Group is the leading online retailer and
web service provider for fashion and lifestyle luxury brands. Since 2009 it’s listed on the Milan Stock Exchange,
and from December 2013 it is included in the FTSE Mib Index (Borsa Italiana main index) with 1.73bn € of
capitalization. Our target price implies a narrow upside potential of 0.31% for a 52 weeks holding period
supporting a HOLD recommendation. In the past year YOOX:IM overperformed domestic and global sector
indexes leading to a current fair price.
Unique business model and increasing international growth opportunities. Yoox is the only vertically
integrated service provider for mono-brand online websites, with more than 30 brands in its portfolio of partners.
Its excellence comes from the know-how developed from the tradition in multi-brand high-end fashion
ecommerce, offering both off-season (yoox.com) and in-season (thecorner.com, shoescribe.com) apparel and
accessories. While Yoox’s roots lie in the luxury culture and craftsmanship expertise of the “Made in Italy”, its
international vocation allows diversification and exceptional growth rates. After its landing in the Asian-Pacific
market in 2010-11, revenues increased by 155% CAGR in this area. Additional growth possibilities are embedded
in unexploited markets, such as Middle East and Latin America (where an acquisition might ease the entrance –
please refer to Potential Upsides).
Sound cash generation supporting investments toward profitability margins growth. With 20.5mn € of NFP
in 2013, Yoox confirms it capability to generate operating cash flows supporting its development plans aimed at
innovate logistics, increase efficiency in inventory management, and expand visibility through marketing.
EBITDA margins and net earnings are expected to grow (+2.7% and +5.1% respectively on revenues in 2019E
from 8.5% and 2.7% in 2012).
Main risks to our target price.. Inventory sizing, IT development capability, renovation of contracts, and
political risk are all factors causing profitability uncertainty for the company.
35.00
32.50
30.00
27.50
25.00
22.50
20.00
17.50
15.00
12.50
10.00
Target Price
Current Price
Last Price
Current Price
Target Price
Buy
Sell
Thousands €
Historical
Projections
2011
2012
291,188
375,924
455,620
539,342
622,908
710,340
790,315
863,440
912,918
Group Total EBITDA
24,083
32,085
42,190
52,035
61,203
72,468
81,568
92,159
102,109
Group interest in profit (loss)
10,002
10,183
13,352
17,202
21,895
31,004
45,363
58,530
71,479
Earnings per Share (in €)
0.19
0.18
0.23
0.30
0.38
0.53
0.78
1.00
1.23
EPS (diluted) (in €)
0.18
0.17
0.20
0.26
0.33
0.47
0.68
0.88
1.08
Return on Equity (in%)
13%
11%
12%
14%
15%
18%
22%
23%
22%
Group Total Revenues
11.02.2014
2013E
2014E
2015E
2016E
2017E
2018E
2019E
1
Yoox Group
Minerva Capital
BUSINESS DESCRIPTION
Where fashion and technology meet
With €456 ml of revenues in 2013 and operations in more than 100 countries, Yoox Group is a global e-store and a
service provider for leading fashion and high-end design brands.
Established in 2000 near Bologna (Italy), Yoox has constantly expanded its geographical reach (entering the USA
in 2003, Japan in 2004, China in 2010, Hong Kong in 2011) supported by the improvement of the distribution
system, the automation of warehouses, and the increasing customer awareness towards e-commerce in general.
Yoox combines two business units which share the same superior technological infrastructure, efficient logistic
and unique skills: the multi-brand and the mono-brand.
Source: Company data
Source: Team estimates
The Multi-brand: a leading lifestyle e-store
Founded with the purpose of buying off-season fashion brands products and re-sell them online at a convenient
discount; Yoox’s aim was to be an authorized seller, while allowing brands to clear out old inventory without
damaging either the brand image or the physical selling activity.
Yoox operates in three multibrand channels:
• yoox.com (launched in 2000) sells end-of-season clothes and accessories of famous brands, exclusive and
capsule collections by well-known or emergent stylists, vintage products and artworks;
• thecorner.com (launched in 2008), originally intended for menswear and enriched with female assortment from
2009, it’s now a luxury online boutique which offers a wide in-season high-fashion collection;
• shoescribe.com (launched in 2012), dedicated to in-season high-end shoes.
The Mono-brand: online service-provider for fashion
In the mono-brand segment of activity (started in 2006) Yoox powers online stores of leading fashion and luxury
brands signing long-term partnerships (typically 5 years or longer). The number of partnerships significantly
increased in the last years (10 in 2008, 32 in 2013). In August 2012 Yoox entered into a 7-year joint venture
agreement with Kering, a French holding company which has shared its luxury brands portfolio with Yoox’s
technology, logistic and consolidated know-how.
Yoox recognizes its share of profits (51% of the joint venture is owned by Kering, 49% owned by Yoox) through
the equity method, as “Income/(Loss) from investment in Associates” and it books its revenue share under the
mono-brand net revenues, but it carries no inventory for these activities. (Please refer to Appendix 5)
The selection of the catalogue and the pricing system
Multi-brand business unit bears a typical retail business risk, namely inventory and returns on sales. To lower
return on sales risk, Yoox mixes purchase contracts and consignment agreements on off-season products or
selected products. These buying contracts can cover from one to four seasons and Yoox does not have any
obligation in terms of minimum volumes to be purchased.
The pricing system for off-season products is based on a discount from original retail prices, while exclusive
collections, vintage and design have a country-specific mark-up set on their purchase cost; moreover, prices are
dynamically adjusted according to actual and expected demand and supply. Thecorner.com and shoescribe.com
do not set prices, as they are defined by brands and aligned with the physical distribution network. Yoox relies and
has strived to maintain good relationships with brands. It has always respected the different identities, trying to
value them on the customized mono-brand websites and not to spoil them through massive sales on the multibrand platforms. Yoox has always chosen not to show the discount to the original price on the off-season items.
A service-oriented technology
The worldwide distribution starts from Italy, and is coupled with local hubs strategically positioned (North
America, China, Hong Kong, Japan) in order to optimize delivery costs and to provide better services to a
customer closer to the delivery structure. In 2013 Yoox implemented an automated platform in Bologna for
clothing items with the aim of increasing store capacity, meanwhile reducing warehouse costs, controlling for
stock levels, lowering the environmental impact and improving the customer service. It has been forecasted that it
will be able to support increasing item volume up to 2019; in 2014, a similar system for shoes is going to be
completed.
Yoox's main distribution partners are UPS for global delivery, Fedex in China, Yamato in Japan, Bartolini and
UPS in Italy. The table (please see figure in Appendix.7) shows the impact of delivery costs on a customer's total
bill, in percentage points. This shows how much the company has reduced delivery costs in the last years.
Moreover, if we take into account the costs of services (included in the costs of sale, mostly made up of delivery
costs), their percentage on revenues has decreased over time. Increasing trading volumes for Yoox may represent a
crucial issue both to gain a stronger contractual position with its distributors and to overcome possible new (small)
entrants.
Yoox on mobile devices
Yoox total traffic from mobile Internet was around 33.1% in August 2013 but increased to 40% by the end of the
year; a lot of possibilities are concentrated in this field, as the number of smartphones and tablets is going to
increase in the coming years. AOV from mobile devices is 8% higher than the AOV from classic devices, in Italy.
Moreover, the Italian consumer-base can still grow, as both Internet penetration (56%) and broadband penetration
(22%) are lower than the average of Western Europe countries (respectively, 75% and 30%).
The Group has always been aware of the increasing importance of Internet on mobile phones. After having
launched apps for iPhone, iPod and iPad since end of 2009 (claiming to have been “the first-ever app for iPad”,
whose apparition on the global market has been made on the same date of the debut of this device on the US
market), it has developed a service called “Speak & Shop”, enabling people to talk with the app thanks to voice
11.02.2014
2
Yoox Group
recognition. This feature is only partially useful, as it allows customers to sort products only by color. On Play
Store, the app is not very popular (the average score is 3,3/5, with almost as many 5 stars as 1 star) and comments
left by users highlight technical problems and say that it is not intuitive and easy to use, thus leaving potential for
improvement. Shoescribe’s app seems to be different, as its average valuation in 4,4/5, even though there are not
many valuations and comments left by users.
Porter Analysis:
see Appendix 10
Treat of new
Entrants
5
4
3
2
1
0
Threat of
Substitute
Products
Bargaining
Power of
Suppliers
Bargaining
Power of
Buyers
Competitition
in the industry
Minerva Capital
Recent developments
Yoox has started a long-term revenues-share agreement with Hearst (publisher of fashion and lifestyle magazine
Harper’s Bazaar), in order to provide its own digital products to ShopBAZAAR.com in the US, while orders
fulfillment and returns will be managed by the company’s US distribution center. ShopBAZAAR.com will
promote thecorner.com and shoescribe.com (which will contribute for more than 50% of ShopBAZAAR.com
assortment), thus giving strong visibility to Yoox.
A new 6-year agreement has been signed with Kartell (home design), whose online store will be launched in
Europe in 1Q 2014. Contracts have been renewed with Moschino and Napapijiri (until June 2018), Emilio Pucci
(until September 2018), Stone Island (March 2018), Diesel (October 2018).
INDUSTRY OVERVIEW AND COMPETITIVE POSITIONING
Consumers are crazy about e-commerce and m-commerce
Ecommerce is a huge and a fast-growing market: in 2012, ecommerce revenues amounted to €311,6 billion in
Europe, $210 billion in China; USA registered $262,3 billion in 2013. Growth rates are still very high (in the
period 2011-2012, yoy growth of sales was 19% in Europe, 16,2% in the USA, 64,7% in China) but they differ a
lot because of the maturity of the market. Mcommerce is fast growing thanks to the diffusion of smartphones and
tablets; in Europe, Q2 2013 registered $4,7 billion revenues (yoy of 24%); in 2012 it accounted for 9,2% of US
ecommerce sales (in 2011 it was 5,4%); in China more than 460 million people access Internet through mobile
devices and 17,1% of them does online shopping; in Japan mcommerce grew by 16,2% , of which merchandise by
32,9%. (Please refer to Appendix 8)
Revenues growth
60%
50%
40%
30%
20%
10%
0%
-10%
2009
2010
2011
2012
2013
-20%
-30%
Aeffe
Barbara Bui
Brunello Cucinelli
Yoox
Source: Companies data
Yoox is a portfolio of fashion and luxury brands
Out of the 38 brands in Yoox’s mono-brand business unit, only 4 are listed in the stock market: Barbara Bui
(Bourse de Paris, since April 2000, ticker: BUI:FP); Aeffe (Milan Stock Exchange, July 2007, ticker: AEF:IM);
Brunello Cucinelli (Milan Stock Exchange, April 2012, ticker: BC:IM); Moncler (Milan Stock Exchange,
December 2013, ticker: MONC:IM).
As a consequence, Yoox might be considered as a market portfolio of unlisted high-end luxury and fashion firms;
each of these brands is a value-driver for Yoox, and their revenues and growth are highly correlated. (Please refer
to Appendix 9)
Enjoying exclusive Know-How
Yoox exploited its know-how in managing Yoox.com to provide an easy access for fashion brands to the web.
Now the firm offers not only consulting and media partnership projects to launch the online stores, but also web
marketing services, exploiting its pre-existing relations with web advertising suppliers. A competitor in web
services, like Demandware (USA, ticker: DWRE:US), has to bear the risk of settling the contracts with suppliers
and only afterward selling them to their customers. Until 2012, the abovementioned firm had recorded a loss in
this particular operation.
Also as online retailer, internal synergies are important. Yoox is able to regenerate its knowhow by managing
other websites, and gets to know new insights from luxury trend. This advantage can't be exploited by no other
webstores such as Asos (ticker: ASC:LN) in USA and UK, Overstock in USA (ticker: OSTK:US), VipShop in
China (ticker: VIPS:US), and StartToday (ticker: 3092:JP) in Japan.
Brand portfolio choices and IT services
Exclusive contracts with brands are established only in the monobrand sector, where Yoox develops the website
and provides maintenance. On the other hand, the multibrand needs to be more flexible: “yoox.com is an infinite
ever-changing source offering rare and innovative styles that are difficult to find in traditional shops” (Balderton
Capital).
Software licenses are important and customer-dedicated platforms are created when dealing with specific needs
and brand identities, in order to meet their customers’ desires.
The safety of websites is crucial for the protection of the customer. Currently, Yoox provides a reliable off-line
system, based for example also on the efficiency of the returns system.
Nothing to compare with large online stores.
Compared to high diversified online stores like Amazon (ticker: AMZ:US) and eBay (ticker: EBAY:US), Yoox's
business model tends to be more focused on fashion and luxury goods, targeting brands’ exclusiveness. Because
of this, larger online stores can hardly impair Yoox, even if they enjoy high economies of scale.
11.02.2014
AOV and retention rate: well above other luxury competitors.
Looking at most important KPI in this sector, from 2008 to 2012 Yoox faced a slight decrease in the retention rate
(7,47% in 2009; 7,12% in 2010; 7,77% in 2011; 7,28%, in 2012) caused by the widening of market awareness
which dilute the number of customers truly interested in sales. This is offset by a higher AOV (€170 in 2009; €179
in 2010; €180 in 2011; €206 in 2012), due to a rational selection of high-end brands on the catalogue. Since
delivery costs are mostly fixed, profitability will benefit. Both Yoox and its peer Asos show a negative correlation
between conversion rate growth and AOV growth. However, in 2013, YOOX outperformed competitors and
obtained an improvement in retention rate and AOV, meaning that YOOX convinces more efficiently visitors
flows on the website thanks to high quality of items and easier access to sales. (Please see Appendix 11)
3
Yoox Group
Minerva Capital
Lower-end substitutes and shopping experience
Global online retailers might be segmented by merchandise average price and shopping experience. Competitors
focused on lower-end segment (e.g., Zalando or Net-à-Porter) convey either fashion-awareness and provide the
same shopping experience given by Yoox. Their websites record higher unique monthly visitors than Yoox (5,7
mln vs 6,0 mln in 2012, Yoox and Net-à-Porter respectively). As a consequence, a likely threat to Yoox is given
by their entering in the high-end segment.
Other competitors focused on loyalty and the “élite feeling”(e.g., Privalia, Vente-Privée, Gilt, Amazon BuyVIP )
require a subscription to benefit shopping in their websites, and merchandise is mostly push driven. As a
consequence, they are not an alternative to Yoox – pull driven.
Physical outlets, flagship and department stores convey a “shopping experience”, especially in luxury shops.
Since ecommerce is set outside social contacts, physical shopping is not a substitute of ecommerce. Actually, the
former might foster the latter: customers might experience and fit in-store, while closing the sale at thecorner.com
and shoescribe.com – e.g. crosschanelling. (Please see Appendix 12-13)
Critical factors in the luxury market
The growth of luxury in recent years has been driven mostly by emerging countries, namely China; while Europe
and USA have maintained constant their spending in luxury, China now accounts for twice as Japan. An higher
consumption propensity has thus to be coupled with a peculiar market, in which consumers are over-exposed to
marketing and brands and they do not show loyalty to a single producer. Yoox can ride this trend as it owns a vast
portfolio of brands, among which any customer may choose, and all of them are positioned in the high-end market
which shows an upward-going trend. (Please see Appendix 14)
Revenues growth trend
Yoox outperformed even in mature markets
The Italian market accounts for 15,7% of global revenues (+20% with respect to 2012) . Among mature markets,
Italy is still facing recession. However, Yoox sales outperformed even a settled competitor like the fashion maison
Prada (ticker: 1913:HK ). (Please see Appendix 14)
Even if the European market is mature, Yoox’s sales growth outperformed the leading luxury maisons average
(21% vs 6% respectively). These results show its higher capability to exploit its market positioning.
USA is becoming mature
In North America, the overall trend shows clearly that Yoox is achieving a stable position, gaining positive growth
values, but aligning at the same time with its competitors. This particular data indicates that USA is becoming a
mature market for Yoox. Nevertheless, the firm was able to smooth the sudden through of the luxury market
growth suffered by others brands, despite the dropping of Diesel.com in November.
60.00%
50.00%
40.00%
30.00%
Japan luxury market turns down
In Japan, Yoox achieved very good results in supporting the growth until 2012, but together with its competitors it
has suffered the downturn of Japanese market in 2013. The market seemed to be mature, like for the other fashion
brands that didn't exceed 20% growth in the last years. This ample drop in growth is largely due to the strong Yen
depreciation, in fact at constant currency rate the Yoox growth rate in Japan was almost 40% in the last year.
20.00%
10.00%
0.00%
2009
2010
2011
2012
-10.00%
Strong deceleration in China
In 2010 Yoox entered the Chinese market and its percentage growth peaked at 160%. Compared to the other firms,
the market for Yoox was still young and profitable until 2012. In the last year the growth fell dramatically, but it
was predictable given the unbearable trend of past years. Nonetheless, the market is still recording an increasing
value of revenues, and the break even in the Chinese investment is expected for 2015.
YOOX
Luxury Trend
Internet Retail Trend
Source: Companies data and team
estimates
INVESTMENT SUMMARY
Yoox Stock Price
35
Yoox Q3
Yoox looking for acquisitions
30
Price
25
Yoox Q2
Yoox taps success via
tablets
smartphones
20
and
Brioni entersi in the
JV with Kering
15
Yoox Q1
10
Dec-12
11.02.2014
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
4
Yoox Group
Minerva Capital
2500000
2000000
1500000
1000000
Daily
Volume
500000
0
Fundamentals and valuation methods support a HOLD recommendation. According to our analysis of Yoox
Group the stock fair price is 29.97€. At the current price, 29.88€, the investment would yield a 0.3% return over
the next 52 weeks. We therefore issue a HOLD recommendation. In the past year YOOX:IM overperformed
domestic and global sector indexes leading to a current fair price. Future profitability prospects are embedded in
its current value (ROE 11% 2012; estimated 22% in 2019E).
Valuation method. We applied DCF model and multiple analysis to assess YOOX:IM fair value. We selected
Yoox’s peers dividing them in two groups, ecommerce and luxury goods, matching the company’s multibrand and
monobrand business areas. However, because the company offers a unique business model with complete vertical
integration as service provider and peculiar partnerships, we couldn’t find a perfect peers group, and this is why
for the final evaluation we weighted multiple analysis 40% and DCF model 60%.
EBITDA margin
2010
2011
2012
Ecommerce
average
Luxury
Average
Multibrand
9.6%
9.8%
10.7%
24.4%
25.9%
28.2%
17.8%
15.1%
15.2%
Monobrand
17.9%
18.9%
19.9%
Good margins and growth potential thanks to heavy investments. Yoox’s multibrand EBITDA margin is on
average higher than its peers’ (16% vs 10% for 2010-2012) because of cutting edge technology and increased
efficiency towards which the company is going to invest more than 150 mln € in the 2011-2015E plan. It is
expected that this investment will provide enough capacity to sustain growth through 2019E without further
resources required. We forecast a 2.8% increase in multibrand EBITDA margin due to gains from economies of
scales, reduction of costs because of technologic innovation of the Bologna Interporto, lack of significant
competitors, and breakeven in China in 2015E (company’s estimates). On the other hand, monobrand EBITDA
margin although increasing (+100bp in 2012) is below luxury sector companies’ margins since Yoox is still a
retailer. Besides the differences in operative margins, Yoox may appear an appealing investment opportunity to
reach returns from those luxury companies that are not yet listed. This is because the contracts for the setting up of
Online Shops of high-end fashion brands are characterized by revenue sharing agreements that increase the
correlation between Yoox’s revenues and the luxury sector’s ones, with the upside of being in the fastest growing
retailing channel (ecommerce).
High capability for cash generation and low financial leverage. Yoox has a high cash generating ability with
which is able to support the capital investments required for innovation and expansion. For this reason NFP has
been negative since 2009 and financial assets will keep exceeding debt in our forecast period. The present 27.12
mln € of debt (from 2012 report) accounts for only 1.57% of market capitalization thus lowering significantly the
risk for the equity investment. We estimate a D/E ratio close to 0 for the future since resources for upgrading will
be generated internally. Nevertheless, in the future there may an upside potential for exploiting the tax shield
advantages by increasing debt.
Potential for new investors (and new objectives). Renzo Rosso has a strong presence in the shareholding book,
with Red Circle S.r.l. Unipersonale and Red Circle Investments S.r.l. accounting for 8.61% of total equity. The
family financial firm is used to invest in startups like HFarm and Fubles, and Rosso’s support to Yoox has come
through capital investment and expertise in the luxury sector. However as Yoox gets bigger and expands
internationally its growth rates start to decline. On the 27/09/2013 Rosso sold 394,337 stocks lowering its share
from 9.13% to nowadays’ figure. This might be a signal of settlement for the company, and we don’t exclude that
as maturity comes closer Rosso will look for a way out from this investment. In our valuation model we forecasted
a 0% payout rate since we don’t think it’s plausible for Yoox to spend its cash on dividends while there are still
many opportunities to increase profitability and returns. However a strong track record in the future might also
attract new investments from pension funds and insurance companies that will look for a yearly cash return.
Investment risks. Yoox international presence is both a strength and a weakness for its business. Although it
leads to diversification, it also exposes the company to economic and political risks. It’s Yoox policy to hedge
against FX changes for USD, GBP, and JPY, but there are still financial risks with this cover and future need to
hedge CNY too. Moreover, subsidiaries abroad expose the parent to repatriation of profits risk and other policies’
impact on profitability and operations. Other relevant risks are: disruption of operations, increasing correlation
with luxury sector and global economy, lagging social media presence, in-house building up of own websites by
monobrand actual and potential partners, hacking and fraud, wrong forecasting of inventory stocks size, and
change in returns policy.
11.02.2014
5
Yoox Group
600000
12%
500000
10%
400000
8%
300000
6%
200000
4%
100000
2%
0
0%
2009 2010 2011 2012 2013 2014
Revenues
EBITDA Margin
Minerva Capital
FINANCIAL ANALYSIS
Yoox showed a high profitability in 2009-2012 with an earnings CAGR of 35.4%, despite the deceleration in
2012 of NI growth (10.183mln €; +1.8% YoY) mainly due to higher interests burden caused by new loans to
support the 2011-2012 investment plan. This result was driven by exceptional revenues growth in new markets
(China launch was in 2010 and Hong Kong’s in 2011, growth rates in both markets averaged 155% since entry),
and good profitability of mature ones (EU, Japan, and USA’s sales CAGR was 42.8% in 2008-2012). We expect
Net Income to grow in the next 7 years more softly (CAGR 32.1%) because of maturity reached in older markets,
sluggish economic recovery of Italy and Japan (estimates give declining or null GDP changes YoY till 2015), new
internet shopping restrictions that will prevent Russia from being a leading emerging market in this field, and
unfavorable exchange rates that will lower real revenues because of inability to complete a thorough pricing passthrough (mainly USD/EUR and CNY/EUR, with forecasted depreciation of 3.65% and 6.7% respectively given by
5y futures quotes). 2013E will present a lower total sales’ growth with respect to 2012 (24.1% in 2013E vs 29.1%
in 2012) supported by 2013 4th quarter report. As for not country related revenues generated by set up fees and
marketing services provision coming from mono-brand customers, we expect growth rates to go up (peaking at
15% in 2018E) only when a new contracts cycle begins and agreements are renovated (mono-brand business
normally works through 5 years contracts).
EBIT Margin
Profit Margin
ROE
11% | 22%
Legend
2012 | 2019E
ROA
4.0% | 10.9%
Equity Multiplier
1.1 | 1.1
Drivers of Profitability. ROE declined sharply in the past 3 years (14.9% in 2010; 11.0% in 2012), but it’s
expected to recover during the forecast period to settle around 22.0% in 2019E. While asset efficiency and
financial leverage remained almost constant (Total Asset Turnover 1.5 2009-2012; Equity multiplier in slight
increase 1.2 2010, 1.4 2012), operating efficiency is declining (Profit Margin 4.3% 2009, 2.7% 2012). To turn
around this result, we expect financial leverage to decrease toward 1.1 in 2019E because the company will have a
significantly positive NFP. Our profit margin projection is also trending upward to 7.8% in 2019E. (Please refer to
Appendix 1).
Total Asset
Turnover
3.7 | 2.5
Profit Margin
2.7% | 7.8%
CAPEX/GCF
100000
50000
Gross cash flow
11.02.2014
2019
2017
2015
2011
2013
2009
0
Net capital expenditures
Margins are sound and recovered in 2012 (EBITDA/sales 8.5% in 2012 vs 8.3% in 2011) despite increasing
COGS (+60% in 2012). The difference from 2009 (EBITDA/sales 9.9%) is mainly due to investments in the AsiaPacific area, where EBITDA break-even is expected in 2015 (company’s estimates). This support our forecasted
increase of 2.7% in the next 6 years, and a final impact of 11.2% on total revenues thanks to improved efficiency
resulting from logistics and technology for the period 2011-2015, and high competitiveness in transport costs
detected (increased bargaining power gained by Yoox as shown by the decrease of incidence of transport costs per
each order: from 4% in 2008 to 2.9% in 2012). Better positioning in the market has also been exploited to reduce
by 2% the discounts to consumers in the last 5 years (please refer to Appendix 7). While multi-brand business has
lower margin (15.2% EBITDA/Sales vs 19.9% for mono-brand), we forecast a greater increase (+2.8%) from
2013E also thanks to the development of an highly automated standardized system for photo shooting that will
raise fully automated procedures without human intervention for inventory management from 60% in 2012 to 90%
by 2016 thus helping increase savings.
Yoox shows a strong cash generation, driven by Gross Cash Flow that increased constantly from 2009 to 2012
(CAGR 34%), and it’s expected to continue even if at decreasing marginal growth rates (from 35% in 2013E to
8.8% in 2019E; nevertheless on absolute value it almost trebled up to 76.81mln €). Still, FCF is negative in the
period 2010-2012 because of large investments in CAPEX (65mln € for the same period, 100mln € for the 2013E2015E plan). Those lead to an increase in FP of about 7.558mln € in 2011 and 13.058mln € in 2012, fully granted
by domestic banks. Investments in Operating Working Capital is estimated to be constant around 5 mln € in the
forecasting period due to ongoing business operations. The cash conversion cycle doesn’t allow internal financing
of payables with receivables (days in operating costs excluding labor costs and D&A and in revenues respectively
113 and 13 in 2012 with a slight increase of the former in the past 3 years) because of extremely long days of
inventory (193 2012 trending up).
Not included in FCF is cash generated by nonoperating activities, mainly profits and losses from the JV with
Kering. From company’s data, a loss of 1mln € will be registered in 2013E and break-even will be reached in
2015, thus contributing with positive CF afterwards.
CFO/CAPEX declined over the period 2009-2012 consistently with greater technologic and logistic updating plans
(330% 2009; 87% 2012) whose impact on profitability and operating cash generation is going to be seen during
the forecast period (ratio increasing from 112% in 2013E to 561% in 2019E).
6
Yoox Group
Minerva Capital
VALUATION
DISCOUNTED CASH F LOW
Terminal growth
rate
Perpetuity
WACCC
(thousands of €)
5.8%
Residual Value
3,316,941.7
PV of Residual
Value
PV of FCFF
1,689,335.3
Value
of
Operations
Nonoperating
assets
Enterprise Value
1,938,657.7
FP and Debt
Equivalents
Value of Equity
(20,294.3)
Number
of
shares
(thousands)
Price from DCF
valuation
Enterprise Value
58,310,000
FP and Debt
Equivalents
(20,294.3)
7.8%
249,322.4
63,187.2
2,001,845.0
2,022,139.2
34.68 €
2,001,845.0
We deemed a three stages Discounted Cash Flow model to evaluate Yoox since in our opinion the company will
face the following evolution: consolidating the existing markets, entering in Middle East and Latin American and
a steady state. Then we combined DCF evaluation with Multiple Analysis to balance our analysis with the market
insights. Our DCF is based on these assumptions:
Sales. While historical data reveal a decreasing share of multibrand revenues on total sales (81.6% 2009; 69.7%
2012), we assume an increase up to 72% in 2013E (backed by Q4 data) and a following decline to 70.5% in
2019E. This is because although mono-brand business is growing at faster rates (CAGR 2009-2012 monobrand
59%, multibrand 28%) we think that there will be a sales volume’s threshold for which Yoox mono-brand
customers will prefer to invest in their own IT capabilities and manage their e-commerce distribution channel
instead of sharing their online-generated revenues with Yoox, also exploiting the expertise gained during the
contract period and thus not renovating it. Moreover, the company is focusing on luxury brands with established
reputation; however, there are only a certain amount of these that are initiating to expand their retailing channels to
the web, and they are almost all already in Yoox’s portfolio (for this assumption, please see also the “Upside
Potentials” paragraph).
Residual growth rate. After the explicit forecast period (2013E-2019E) we projected a four year time window to
include entry in new markets (from company sources it will not happen before 2019). Therefore we allowed
aggregate steady state growth rate to increase from 5.8% to 7% till 2023E to include Yoox’s expansion to South
America and Middle East. Final growth is based on GDP change projections, estimated inflation figures, real
exchange rate trends and AOV drivers growth potential for each geographical area in which the company is active
(please refer to Appendix 3). Continuing Value accounts for 84.4% of Enterprise Value.
CAPEX. Due to technologic investments to support business innovation and automation 100mln € will be spent in
2013E-2015E (company’s forecasts). CAPEX growth is however expected to decelerate with regards to 20112012 investment plan, resulting in a decreasing CAPEX/Revenues ratio (from 8% in 2012 to 1.5% in 2019E).
Likewise, entry in new markets for the second DCF stage will require more capital investments. Growth is planned
through the “Lego” approach to logistics that consists in limited and modular additional investments that limits
dependence on a single warehouse (company data).
WACC. The cost of equity was calculated using CAPM model. We used as risk free interest rate the EURO 10
year interest rate swap yield of 1.94%. The adjusted beta is 0.89, given by an average of YOOX:IM price in local
currency regressed against indexes from each geographical region in which the company is active weighted by the
share of total revenues generated in each area, using weekly observations from Yoox listing. Country risk
premium is equal to 1.4%, given by a weighted average with respect to sales of the 10 years CDS of each country
in YOOX market pool. Market risk premium is 4.96% from Professor Damodaran’s estimates1. The after tax cost
of debt is 2.17% and it is given by an average of interest rates implemented by banks for Yoox’s loans, with 2011
new debt accounting for half weight with respect to 2012’s. For more details please see Appendix 3.
WACC
2013E
2014E
Multibrand
1,048,109
1,161,710
Monobrand
187,943
206,977
Tot
1,236,054
1,368,687
Mkt cap
1,227,384
1,360,017
P per Share
€ 21.05
€ 23.32
Median
€ 22.19
Growth
3.7%
4.2%
4.7%
5.2%
5.7%
6.2%
6.7%
7.2%
7.7%
6.8%
€ 25.60
€ 29.36
€ 34.91
€ 43.97
€ 61.38
€ 108.55
€ 710.64
-€ 138.09
-€ 59.25
7.3%
€ 22.83
€ 25.52
€ 29.26
€ 34.79
€ 43.82
€ 61.16
€ 108.13
€ 707.79
-€ 137.51
7.8%
€ 20.73
€ 22.76
€ 25.44
€ 29.17
€ 34.68
€ 43.66
€ 60.93
€ 107.72
€ 704.95
8.3%
€ 19.09
€ 20.67
€ 22.69
€ 25.37
€ 29.07
€ 34.56
€ 43.51
€ 60.71
€ 107.31
8.8%
€ 17.78
€ 19.04
€ 20.61
€ 22.62
€ 25.29
€ 28.98
€ 34.45
€ 43.36
€ 60.49
MULTIPLES ANALYSIS
Given Yoox unique business model we decided to analyze Yoox’s business units separately by carrying out a sum
of parts multiple valuation, gathering peers that operate mainly in the multibrand business (ecommerce) and in the
monobrand one (luxury goods). The company still enjoys the competitive advantage of the first mover in the
global market, even if there are competitors (Vipshop Holdings and Start Today for the multibrand) confined in
domestic markets only. We chose EV/EBITDA and EV/Sales multiples, for monobrand and multibrand
respectively, for the valuation of Yoox, based on our 2014E estimates.
1
website: http://pages.stern.nyu.edu/~adamodar/
11.02.2014
7
Yoox Group
Ticker
(Bloomberg)
Country of
consolidation
Share Price
(31/12/2013)
Geographical
Diversification
Similarity in
merchandise
Growth rates
Enterprise
Value,
thousands
(31/12/2013)
EV/Sales 2014E
Minerva Capital
MULTIBRAND PEERS
Amazon
EBay
Asos
Overstock
Vipshop
Start Today
AMZN US
EBAY US
ASC LN
OSTK US
VIPS US
3092 JP
1913 HK
MC FP
RMS FP
CFR VX
USA
USA
UK
USA
CN
JP
IT
FR
FR
CH
398.79
USD
●●●
54.87
USD
●●●
47.50
GBP
○○●
30.79 USD
2192.90
JPY
○○○
69.00
EUR
●●●
132.60
EUR
●●●
263.50
EUR
●●●
61.24 EUR
○○○
103.50
USD
○○○
○○●
○○●
○●●
○○●
○●●
○●●
●●●
○●●
○●●
○●●
○●●
○●●
●●●
○○○
●●●
●●●
○●●
○●●
●●●
○●●
173788610
USD
66093310
USD
3851460
GBP
583340
USD
5760460
USD
228850000
JPY
16622300
EUR
73987440
EUR
22913320
EUR
30653110
EUR
3.94
2.28
5.87
3.33
23.32
EV/EBITDA
2014E
Yoox EV/Sales
2014E
10.68
58.14
6.79
35.44
MONOBRAND PEERS
Prada
LVHM
Hermes
Richemont
●●●
18.31
3.71
38.45
Yoox
EV/EBITDA
2014E
●= a lot ○= not at all
16
180
14
160
12
140
120
10
100
8
80
6
60
4
40
2
20
0
0
2012
2013
2014
ecomm PEG
lux PEG
Yoox PEG
ecomm P/E
luxury P/E
Yoox P/E
Past multibrand EV/EBITDA values for Yoox are in line with the adjusted average of e-commerce peers group.
However, luxury companies relies on lower but more stable multiples due to sector’s maturity. EBITDA margin
for the multibrand unit is similar to the peers average, but competitors show high variability for this figure.
Therefore we chose 2014E EV/EBITDA ratio to evaluate Yoox’s multibrand business, so that pricing includes
different operating profitability.
We used EV/Sales to evaluate the monobrand business. Yoox monobrand’s revenues are correlated with luxury
brands’ one: sales increase in luxury brands drives the value of Yoox multibrand division. Yet, EBITDA margins
are not comparable since the company is a service provider, not a maison nor a manufacturer. Summing up the
two parts derived from multiple evaluation we gathered a share price of 22.91€.
We controlled for diverging growth rates for Yoox and its competitors. Yoox’s PEG ratio for 2013E equals the
ecommerce average (534%), while luxury sector suggests a clear overvaluation of the stock (adj. average 141%).
2014E estimated values support the fact that Yoox’s stock price already reflects growth prospects (Yoox 407%;
ecommerce average 117%; luxury adjusted average 249%). In fact in 2012 Yoox traded at 151.4x times its years’
earnings, which is a much higher value with respect to its peers.
This method ignores the economies of scale entailed in the union of both business units under the same company.
As a consequence we blended at 40% our multiple analysis valuation with the DCF one.
POTENTIAL UPSIDES
New Markets driven by Internet access and disposable income
After the breakeven in China (expected for 2015), Yoox will be ready to attack new markets; the next targets will
be Middle East and Latina America. Middle East is closer to the current physical hubs (Europe, China),
infrastructures (Internet, distribution channels) are more developed and average GDP per capita is higher.
Disposable income per household (above 35000 US$ for all countries, except for Egypt - above 25000 US$),
shows different percentages and growth rates are quite different, due to country-specific issues (income inequality,
GDP growth, inflation, political stability, economic system). (Please refer to Appendix 15).
Latin America presents relatively low above-$35000 per household percentages, but growth rates have been quite
important and they are expected to keep up the pace, symptom of the re-birth of the whole area.
Free-trade agreements still do not exist among American, European and Middle-East countries, despite copious
projects; they would boost Yoox’s expansion allowing the company to exploit its present physical hubs, to trade
without import quotas and without making huge initial investments, which may take place only after a period of
market penetration and settlement of the business.
Ecommerce is a growing distribution channel; in 2012, revenues amounted to $9 billion in the Middle East, $11
billion in Brazil. Growth rates are very high (in the period 2011-2012, YoY growth of sales was 29% in the
Middle East countries, 20% in Brazil, 32% in Argentina, 46% in Mexico) and they show the potential of these
markets. Mcommerce is fast growing thanks to the rapid diffusion of smartphones and tablets: 10% of total online
transactions in the Middle East are operated through mobile devices; Brazilian Chamber of Commerce has
forecasted for 2013 a YoY growth of 657%, thus reaching US$1 billion of mcommerce revenues. (Please refer to
Appendix 8).
11.02.2014
8
Yoox Group
Farfetcht
BS (GBP)
2012
2011
2010
Turover
1155914
4889960
1390277
Cost of
Sales
5378877
2180221
706693
Gross
Profit
6172037
2709739
683584
-2934021
-3820763
-461521
Operatin
Profit
YOOX:IM changes wrt JV final
growth rate
€ 36.50
€ 36.00
Minerva Capital
Possible Acquisition
Yoox's forecasts show a lot of liquidity that might be invested in acquisitions. A possible target company is in our
opinion Farfetcht.com, a start-up based in UK founded in 2008 by Josè Neves. This online store is a connection
channel for small and medium cutting-edge boutiques and provides a unique website available all over the world.
Its affiliates can use the platform to reach the global audience, otherwise too far and too expensive for their
dimension and resources. The Farfetcht project is fast growing, and it has now reached US and in particular
Brazil's pool. In Brazil they succeeded in building a rich and solid base by adding 70 local Brazilian designers to
their high-end fashion store. Moreover, they obtained an important visibility in the magazine "Condé Nast" by
making an agreement which implied new additional funds to sustain new investments. Farfetcht raised totally $
24 million from "Advent Venture Partners". Assuming an IIR equal to 25% and an investment horizon of 5 year,
we know that in 2017 the company will need almost $73mln (€53mln), that can be fully covered by the liquidity
excess of YOOX.
Further profits’ growth from the Joint Venture with Kering. In DCF Analysis we considered a continuing
value for the estimated share of profits from the JV based on Yoox’s WACC and terminal growth rate. However,
the agreement between the two parties includes a call and a put option on the JV maturing in 2019 (there are no
public information on these EV thresholds). This means that there’s a lower limit to the value of this project for
Yoox, as well as an upper one. We analyzed the sensitivity of our estimated stock price to different growth rates
for the stream of profits form the JV, whose results are in the tab on the side. For instance there’s an upside
potential of 2.7% for Yoox’s stocks if the perpetual constant growth rate rises 100bp.
Possible new brand partnerships. On the 1st of January 2014 Netrada (a software company based in Germany
that provides web services to fashion brands for the maintenance of their online websites). As a consequence, its
clients (e.g. Esprit, Hugo Boss, Lacoste, Tommy Hilfiger) might now search for other partners. Yoox could be the
natural candidate.
€ 35.50
€ 35.00
€ 34.50
€ 34.00
€ 33.50
Price
CORPORATE GOVERNANCE
YOOX Group made great effort in order to guarantee transparency, timeliness, accuracy and equal access to
information to each shareholders group, because of its widespread shareholders base. The Group adopted a Code
of Ethics and an internal mechanism of control in order to standardize procedures and discourage behaviors
misaligned with the company’s credo.
In order to incentivize and support loyalty to the firm, the Shareholders' Meeting approved a "Company
Incentive" Stock Option Plan and Stock Grant Plan for the Board of Directors and for employees of the company
and of its subsidiaries. At 31 December 2012, the total option neither expired or exercised gave right to 7,516,808
shares. Federico Marchetti has an option right over 1,500,000 shares (2,3% fully diluted share capital) from
December 2012. This aligned managers’ objectives with the company’s by tiding their payoff to company results,
but it also increased the possibility of takeovers, given the high floating.
Corporate Governance. We estimated the quality of the firm by using OECD Criteria, reporting a final rate of 7
out of 10. For the estimation, we referred to the Standard Ethic Italian Index, which assigned to Yoox a rate of EEand a weight of 3.112% in the whole FTSE MIB.
Corporate Social Responsibility. YOOX committed important efforts in order to improve its sustainability
attention, by focusing on electric savings and waste reduction. It declared to put great attention into choosing
supply partners that respect environmental standards. Even though it didn't obtain in 2013 the ISO Certification
14001 as promised in 2012 Sustainability Report, the company has supported since 2009 a permanent investment
called YOOXIGEN in order to develop eco-sustainable projects. (Please refer to Appendix 18).
INVESTMENT RISKS
- MARKET RISK:
11.02.2014
Currency. As the firm operates internationally, it is exposed to currency risk that can be traced both in
transactions and in translation. This cost is totally borne by Yoox S.p.A. and the hedging activity is settled to
protect trade receivables from depreciations of Euro over other currencies. The main countries outside EMU in
which Yoox operates are USA, UK, Japan and China. In order to limit the volatility of sales’ value, hedging is
made against US Dollars, UK Pounds and Japanese Yen in relation to credit amounts. The hedging coverage is
quite wide because an overinvestment or an underinvestment can cause an uncovered loss. The cost of this activity
increased in the last year, even if covering these three currencies is not particularly expensive because the Covered
Interest Parity works well in these markets. In the future, when China’s share of revenues will become substantial,
an additional protection should be taken against an appreciation of the Chinese Remimbi. In this case, the cost of
hedging will be much higher because there's no parity in the currency markets and the change is settled artificially
low. (Please see Appendix 16).
9
Yoox Group
Minerva Capital
Presence and visibility. Yoox is undergoing the risk of lagging behind in visibility and social media presence, and
therefore needs to improve its exposition in the market and invest in social advertising. Being recognized as a
leader in the luxury market (most of all from retailer customers) should be a goal, because the binomial Yooxfashion could help to achieve a dominant position and to increase profitability. Currently the firm is not so well
recognizable in the luxury market, even if the last advertising program has succeeded in increasing Italian sales.
The main challenge is to be present in social networks, since today Yoox hasn't attracted much interest from web
users. (Please refer to Appendix 17)
- ECONOMIC RISK:
Failure of economic recovery. Yoox is enjoying high growth rates since it is still expanding its presence(because
of its continuing expansion) in the online-luxury market. However, as soon as growth rates start to decline, the
company may be exposed to losses in case of downturn of the global economy. Yoox can thus exploit its
defensive profile because of its particular positioning: consumption propensity of its target customers (from upperclasses) is less sensitive to the economic evolution than middle-class consumers.
- OPERATIONAL RISK:
Threats of ending contracts. Mono-brand business revenues comes from two sources: a) selling web services; b)
revenue sharing from online stores. The first is fixed and especially for set-up fees it’s one-off only. The second
conversely is present as long as the brand sells online through the partnership and it grows together with its sales.
The partnerships are due for renewal every 5 years, but at that moment the brand partner can decide to stop sharing
online revenues and not to sign another contract. This may occur whenever the sales value increases to the point it
no longer makes economic sense paying a percentage to an external service provider. As their online dimension
grows, brands may decide to internalize the service. No forecasts can be done about the timing in which the order
volumes will reach this threshold, but potentially the decision to break up the relationship can be taken every 5
years. Nevertheless, Yoox's advantage is to offer a web marketing experience and a complete online service that is
not easy to acquire and needs high fixed costs.
Subjection to brands marketing strategies. Yoox as a service provider doesn’t have control over the marketing
of the merchandise, which is totally managed by online partners and fashion brands. Yoox is in charge of
advertising web sites and their special offers, but not changing the Brand identity nor the collection presentation.
Due to these reasons Yoox has to rely on the brand’s marketing policy, therefore suffering the potential risk of
losses in case of wrong advertising campaigns
IT development. Yoox should maintain a high level of efficiency in technology, security and web system
integrity. As an internet retailer, it is exposed to theft of customers data, such as number of credit card or
addresses, and system breakdowns. As hackering and Internet frauds increase, Yoox must invest in technology in
order to protect its platforms, but it is difficult to forecast correlated probabilities. The rapid enhancement of IT is
at the same time sure but unpredictable, and it is problematic to budget the speed-up pace.
Inventory sizing. A core risk in the Multi-Brand business is associated with the difficulty in forecasting the right
stock sizing in order to have a high-quality and varied catalogue, which has to be balanced with costs of inventory.
Increasing returns. As happened in Germany for “Zalando parties” (a teenage trend which entails high-value
orders, returned after a one-time use at “fashion parties”), it's possible that merchandise returns increase
unexpectedly. In the European Union a no-questions return period of 14 days will soon be required for each online
purchase, and in Germany it has already been adopted. In America there are no strict provisions on returns policy,
but Yoox guarantees the return option on its orders anyhow. A number of studies on ecommerce in the USA seem
to indicate that companies bear costs ranging between $6 to $18 for each returned item, without counting the
possible losses from apparels that couldn't be resold again. Another study by Christian Schultze from Frankfurt
School found that, without returns, the online profits would be almost 50% higher. It's unlikely that a Yoox
records phenomena like “Zalando parties”, due to the higher item costs which select the quality of customers.
Anyway, the cost of returns is entirely borne by the retailer firm and with difficulty it could be significantly cut
without touching the customers recess right.
-POLITICAL RISK:
11.02.2014
Change in trade policies. With the fast growth of online commerce and of customer-driven export, many
countries are trying to protect their home market by restricting trans-border trade. Russia (inflation rate: 6%) has
set new regulations on home delivery, lowering thresholds for customs duties; FedEx, Dhl and, in Italy, Poste
Italiane have suspended their activity in the Russian area.
Argentina (where households spend 20% of their income online) has a current inflation rate of 6% and it is now
attempting to prevent capital out flow, through ecommerce in the first place; a recent legislation entails more
bureaucracy and 50% tax rate on foreign products (from a value of €25), plus a charge of 35% if the payment
happens with an Argentinian credit card.
Yoox extension may be entailed by the unforeseen introduction of restrictive trade and fiscal policies like these
ones.
10
Yoox Group
Minerva Capital
APPENDICES
CONTENTS
APPENDIX 1 – Financial Statement ........................................................................................................................... 12
Income Statement ......................................................................................................................................................... 12
Balance Sheet................................................................................................................................................................ 13
Cash Flow Statement .................................................................................................................................................... 14
APPENDIX 2 – Ratios ................................................................................................................................................. 14
APPENDIX 3 - DCF Assumptions .............................................................................................................................. 15
APPENDIX 4 - Multiples Analysis ............................................................................................................................. 16
APPENDIX 5 - Business Description ........................................................................................................................... 18
APPENDIX 6 - Discount rate ....................................................................................................................................... 19
APPENDIX 7 - Delivery cost ....................................................................................................................................... 19
APPENDIX 8 - Industry Overview and Competitive Positioning ................................................................................ 20
Consumers are mad about Ecommerce and Mcommerce ............................................................................................. 20
EUROPE ................................................................................................................................................................... 20
USA .......................................................................................................................................................................... 20
CHINA...................................................................................................................................................................... 21
JAPAN ...................................................................................................................................................................... 21
MIDDLE EAST ........................................................................................................................................................ 21
LATIN AMERICA ................................................................................................................................................... 22
APPENDIX 9 – Industry Overview and Competitive Positioning ............................................................................... 23
Value drivers ................................................................................................................................................................. 23
APPENDIX 10 – Porter analysis .................................................................................................................................. 25
APPENDIX 11 - AOV and retention rate ..................................................................................................................... 26
APPENDIX 12 - Customers ......................................................................................................................................... 27
APPENDIX 13 - Crosschanneling ............................................................................................................................... 27
APPENDIX 14 - Criticalities ........................................................................................................................................ 28
APPENDIX 14 – Fashion trends .................................................................................................................................. 29
APPENDIX 15 - Potential Upsides ............................................................................................................................... 31
New Markets ................................................................................................................................................................. 31
APPENDIX 16 – Investment Risks .............................................................................................................................. 32
Overview - Probability and Impact of Risks ................................................................................................................. 33
APPENDIX 17 - Social Media Presence ...................................................................................................................... 34
APPENDIX 18 – Corporate Governance...................................................................................................................... 36
11.02.2014
11
Yoox Group
Minerva Capital
APPENDIX 1 – FINANCIAL STATEMENT
Income Statement
€ thousands
Historical
Projections
2011
2012
2013E
2014E
2015E
2016E
2017E
2018E
2019E
57677.0
59049.0
70858.8
78653.3
83372.5
86707.4
89742.1
92434.4
94930.1
17.1%
2.4%
20.0%
11.0%
6.0%
4.0%
3.5%
3.0%
2.7%
141572.0
180180.0
218738.5
255924.1
291753.4
326763.9
356172.6
383479.2
37.5%
27.3%
21.4%
17.0%
14.0%
12.0%
9.0%
7.7%
402653.
1
5.0%
59731.0
81514.0
102789.2
126430.7
150452.5
176029.4
200673.5
222747.6
Sales by Geografic Region:
Italy
growth rate
Other Europe
growth rate
North America
growth rate
Japan
41.5%
36.5%
26.1%
23.0%
19.0%
17.0%
14.0%
11.0%
238339.
9
7.0%
19827.0
31081.0
34406.7
38535.5
42389.0
45780.1
48526.9
50953.3
52481.9
growth rate
47.6%
56.8%
10.7%
12.0%
10.0%
8.0%
6.0%
5.0%
3.0%
Other Countries
6089.0
14593.0
21801.9
32702.9
47419.2
66861.1
86919.4
104303.3
growth rate
170.6%
139.7%
49.4%
50.0%
45.0%
41.0%
30.0%
20.0%
114733.
7
10.0%
Not Country Related
6292.0
9507.0
7025.7
7095.9
7521.7
8198.6
8280.6
9522.7
9779.8
growth rate
50.6%
51.1%
-26.1%
1.0%
6.0%
9.0%
1.0%
15.0%
2.7%
291188.0
375924.0
455620.8
539342.3
622908.3
710340.5
790315.2
863440.5
35.9%
29.1%
21.2%
18.4%
15.5%
14.0%
11.3%
9.3%
912918.
6
5.7%
32217
39956
52487.51
64073.87
73487.61
85738.1
94719.28
106527
Group Total Revenues
growth rate
EBITDA
Multibrand
Margin on multibrand sales
15.1%
15.2%
16.0%
16.5%
16.5%
17.0%
17.0%
17.5%
115849.
4
18.0%
Monobrand
14823
22658
26152.63
31109.26
36926
42847.74
48493.74
52980.1
56555.3
Margin on monobrand sales
18.9%
19.9%
20.5%
20.6%
20.8%
20.8%
20.8%
20.8%
21.0%
EBITDA
47040
62614
78640.14
95183,13
110413,6
128585,8
143213
159507,7
(22957.0)
(30529.0)
(36449.7)
(43147,4)
(49209,8)
(56116,9)
(61644,6)
(67348,4)
7.9%
8.1%
8.0%
8,0%
7,9%
7,9%
7,8%
7,8%
172404,
7
(70294,
7)
7,7%
24083
32085
42190.48
52035,75
61203,86
72468,94
81568,44
92159,32
Corporate costs
Margin on total revenues
Group Total EBITDA
EBITDA Margin
Depreciation
Amortization of
intangibles
Group Total EBIT
operating
EBIT Margin
Financial income
8.3%
8.5%
9.3%
9,6%
9,8%
10,2%
10,3%
10,7%
102109,
9
11,2%
(3603.0)
(5939.0)
(9664.7)
(11756,6)
(14127,7)
(15646,0)
(12801,3)
(11170,2)
(8888,2)
(4056.0)
(7235.0)
(10746.5)
(13606,6)
(15022,1)
(15324.9)
(10803.1)
(9208.1)
(8892.6)
16424.0
18911.0
21779.4
26672.6
32054.1
41498.0
57964.0
71781.0
84329.2
5.6%
5.0%
4.8%
4.9%
5.1%
5.8%
7.3%
8.3%
9.2%
1237.0
1557.0
830.5
891.9
1345.7
3044.2
4983.6
7422.3
10320.2
(1209.0)
(3538.0)
(2278.1)
(2696.7)
(3114.5)
(3551.7)
(3951.6)
(4317.2)
(4564.6)
0.0
(366.0)
(1000.0)
(500.0)
0.0
500.0
1000.0
1500.0
2000.0
16452.0
16564.0
19331.8
24367.7
30285.2
41490.5
59996.0
76386.1
92084.8
5.6%
4.4%
4.2%
4.5%
4.9%
5.8%
7.6%
8.8%
10.1%
Income taxes
(6450.0)
(6381.0)
(5978.9)
(7164.9)
(8389.7)
(10485.5)
(14632.0)
(17855.9)
PROFIT FOR THE YEAR
10002.0
10183.0
13352.8
17202.8
21895.5
31005.0
45364.0
58530.2
(20605.
4)
71479.3
0.0
0.0
0.0
0.0
0,0
0.0
0.0
0.0
0.0
Financial expenses
Other income from (expenses
for) equity investments
PROFIT BEFORE TAXES
EBT Margin
Minority interest in (profit)
11.02.2014
12
Minerva Capital
Yoox Group
loss
Group interest in profit (loss)
10002.0
10183.0
13352.8
17202.8
21895.5
31005.0
45364.0
58530.2
71479.3
Profit Margin
3.4%
2.7%
2.9%
3,2%
3.5%
4.4%
5.7%
6.8%
7.8%
Earnings Per Share
0.19
0.18
0.23
0.30
0.38
0.53
0.78
1.00
1.23
Balance Sheet
€ thousands
Historical
Projections
Italian style numbers
2011
2012
2013E
2014E
2015E
2016E
2017E
2018E
2019E
Working cash
454,9
715,5
911,2
1078,7
1245,8
710,3
790,3
863,4
456,5
Trade receivables
8245,0
13068,0
12482,8
14776,5
17066,0
19461,4
21652,5
23655,9
25011,5
Days in Revenues
10
13
10
10
10
10
10
10
10
101862,0
138216,0
159779,3
189139,2
218444,6
249105,7
277151,6
302795,6
320146,8
Days in Multibrand Revenues
175
193
178
178
179
180
182
182
182
Other operating current
assets
Operating current assets
4694,0
4971,0
6606,5
7820,5
9032,2
10299,9
11459,6
12519,9
13237,3
115255,9
156970,5
179779,8
212814,9
245788,5
279577,4
311054,0
339834,8
358852,0
Trade payable
(62794,0)
(96763,0)
(118217,0)
(139283,4)
95
113
114
114
(160712,
7)
114
(182431,
9)
114
(202924,
2)
114
(220745,
6)
114
(232217,
0)
114
(19719,0)
(26077,0)
(31605,4)
(37413,0)
(43209,7)
(54822,4)
(59894,9)
(63327,1)
(1580,6)
(1726,9)
(1825,8)
(259327,
2)
51726,8
(282367,
4)
57467,4
(297370,
0)
61482,0
Inventories
Days in operating costs
excluding labor costs and
D&A
Other operating current
liabilities
Income taxes payable
Operating current liabilities
Operating working capital
(310,0)
(1261,0)
(911,2)
(1078,7)
(1245,8)
(49274,7
)
(1420,7)
(82823,0)
(124101,0)
(150733,6)
(177775,1)
32432,9
32869,5
29046,2
35039,8
(205168,
3)
40620,2
(233127,
3)
46450,1
1,4
1,3
1,2
1,2
1,2
1,2
1,2
1,2
1,2
Operating intangibles
12186,0
19539,0
24739,3
27312,9
27863,5
19642,0
16742,0
16168,3
11840,3
Net property, plant, and
equipment
Total operating fixed capital
19315,0
29023,0
35305,1
42425,5
46985,0
38442,4
33544,2
26691,2
26932,2
31501,0
48562,0
60044,3
69738,4
74848,6
58084,4
50286,3
42859,5
38772,6
Total other operating assets
(liabilities)
Invested capital excluding
intangibles
Goodwill
and
other
intangibles
Invested capital including
intangibles
Capital Turnover
2663,0
4020,0
4020,0
4020,0
4020,0
4020,0
4020,0
4020,0
4020,0
66596,9
85451,5
93110,6
108798,2
119488,8
108554,5
106033,1
104346,9
104274,6
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
66596,9
85451,5
93110,6
108798,2
119488,8
108554,5
106033,1
104346,9
104274,6
5,2
4,9
5,1
5,3
5,5
6,2
7,4
8,2
8,8
Current Ratio
Nonoperating assets
1810,0
1709,0
1709,0
1709,0
1709,0
1709,0
1709,0
1709,0
1709,0
Total funds invested
68406,9
87160,5
94819,6
110507,2
121197,8
110263,5
107742,1
106055,9
105983,6
(14360,1)
(14813,0)
(20506,3)
(22021,5)
(33226,4)
213,0
212,0
212,0
212,0
212,0
(75165,6
)
212,0
(123051,
0)
212,0
(183267,
3)
212,0
(254818,
9)
212,0
(14147,1)
(14601,0)
(20294,3)
(21809,5)
(33014,4)
(122839,
0)
0,0
(183055,
3)
0,0
(254606,
9)
0,0
230581,1
289111,3
360590,6
Net financial position
Debt equivalents
Net financial position and debt
equivalents
Minority interests
Shareholders' equity
11.02.2014
0,0
0,0
0,0
0,0
0,0
(74953,6
)
0,0
82554,0
101761,0
115113,8
132316,6
154212,2
185217,1
13
Yoox Group
Total source of financing
68406,9
87160,0
94819,6
110507,2
121197,8
110263,5
Minerva Capital
107742,1
106055,9
105983,6
Cash Flow Statement
€ thousands
Historical
2011
2012
2013E
2014E
2015E
2016E
2017E
2018E
2019E
11425,2
13242,8
15245,6
18670,8
22437,8
29048,6
40574,8
50246,7
59030,4
4056,0
7235,0
10746,5
13606,6
15022,1
15324,9
10803,1
9208,1
8892,6
NOPLAT
Amortization
intangibles
Depreciation
of
operating
Projections
3603,0
5939,0
9664,7
11756,6
14127,7
15646,0
12801,3
11170,2
8888,2
Gross cash flow
19084,2
26416,8
35656,7
44034,0
51587,6
60019,5
64179,2
70625,0
76811,2
Change in operating working
capital
Net capital expenditures
(6288,1)
(436,6)
3823,3
(5993,6)
(5580,5)
(5829,8)
(5276,7)
(5740,6)
(4014,7)
(23636,0)
(30235,0)
(31893,5)
(35057,2)
(14206,8)
(15806,3)
(12951,6)
(13693,8)
-8,1%
-8,0%
-7,0%
-6,5%
(34260,0
)
-5,5%
-2,0%
-2,0%
-1,5%
-1,5%
1847,0
497,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
(28077,1)
(30174,6)
(28070,2)
(41050,8)
(20036,7)
(21083,0)
(18692,2)
(17708,4)
(8992,9)
(3757,9)
7586,5
2983,2
(39840,4
)
11747,2
39982,9
43096,2
51932,9
59102,7
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
CAPEX/Revenues
Change in other operating assets
and liabilities
Gross investment
Free cash flow before goodwill
Investments in goodwill and
other intangibles
Free cash flow after goodwill
(8992,9)
(3757,9)
7586,5
2983,2
11747,2
39982,9
43096,2
51932,9
59102,7
Investments in nonoperating
assets
Nonoperating income (expenses)
(880,9)
(15263,4)
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
Financial income
1237,0
1557,0
830,5
891,9
1345,7
3044,2
4983,6
7422,3
10320,2
0,0
(366,0)
(1000,0)
(500,0)
0,0
500,0
1000,0
1500,0
2000,0
(1451,2)
(712,8)
554,9
836,9
1226,6
1963,9
2757,2
3678,4
4693,3
(116,0)
(1,0)
0,0
0,0
0,0
0,0
0,0
0,0
0,0
Other income from (expenses
for) equity investments
Nonoperating taxes
Change in debt equivalents
Nonoperating cash flow
Cash available to investors
Financial expense
(1211,1)
(14786,1)
385,4
1228,7
2572,2
5508,1
8740,7
12600,7
17013,5
(10204,0)
(18544,0)
7971,9
4211,9
14319,4
45491,0
51836,9
64533,6
76116,2
(1209,0)
(3538,0)
(2278,1)
(2696,7)
(3114,5)
(3551,7)
(3951,6)
(4317,2)
(4564,6)
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
Change in minority interests
3855,0
9024,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
Decrease (increase) in net financial
position
Beginning net financial position
(7558,0)
(13058,0)
5693,8
1515,2
11204,9
41939,3
47885,3
60216,4
71551,6
6446,0
(14360,1)
(14813,0)
(20506,3)
(33226,4)
(75165,6)
Ending net financial position
14004,0
(1302,1)
(20506,8)
(22021,5)
(22021,5
)
(33226,4
)
(75165,6)
(123051,
0)
(123051,
0)
(183267,
3)
(183267,
3)
(254818,
9)
Change in shareholders' equity
APPENDIX 2 – RATIOS
2009
2010
2011
2012
2013E
2014E
2015E
2016E
2017E
2018E
2019E
11,6%
14,9%
13,2%
11,0%
12,3%
13,9%
15,3%
18,3%
21,8%
22,5%
22,0%
4,0%
6,3%
5,6%
4,0%
5,4%
6,0%
6,7%
7,4%
9,3%
10,2%
10,9%
2,7%
4,3%
3,4%
2,7%
2,9%
3,2%
3,5%
4,4%
5,7%
6,8%
7,8%
2.7
3.8
3.5
3.7
4.0
4.1
4.0
3.8
3.4
3.0
2.5
Profitability ratios
DuPont Analysis
ROE
ROA
Profit Margin
Total Assets Turnover
Equity Multiplier
ROIC
11.02.2014
2,1
1,2
1,3
1,1
1,1
1,1
1,1
1,1
1,1
1,1
1,1
36,4%
33,3%
20,6%
17,4%
17,1%
18,5%
19,7%
25,5%
37,8%
47,8%
56,6%
14
Yoox Group
Minerva Capital
69,40
%
8,4%
70,38
%
7,0%
69,56
%
5,6%
70,03
%
5,0%
70,0%
70,0%
70,0%
70,0%
70,0%
70,0%
70,0%
4,8%
4,9%
5,1%
5,8%
7,3%
8,3%
9,2%
6,2
6,7
5,2
4,9
5,1
5,3
5,5
6,2
7,4
8,2
8,8
EBITDA/Revenues
9,9%
8,8%
8,3%
8,5%
9,3%
9,6%
9,8%
10,2%
10,3%
10,7%
11,2%
EBIT/Revenues
5,8%
7,0%
5,6%
5,0%
4,8%
4,9%
5,1%
5,8%
7,3%
8,3%
9,2%
NOPLAT/Revenues
5,8%
4,9%
3,9%
3,5%
3,3%
3,5%
3,6%
4,1%
5,1%
5,8%
6,5%
Current Ratio (COA/COL)
1,2
1,4
1,4
1,3
1,2
1,2
1,2
1,2
1,2
1,2
1,2
Quick Ratio (CFA/CL)
0,9
0,5
0,4
0,4
0,1
0,1
0,1
0,4
0,6
0,7
0,9
Interest Coverage Ratio
4,5
14,3
13,6
5,3
9,6
9,9
10,3
11,7
14,7
16,6
18,5
330,7
%
2,2%
115,9
%
5,8%
80,7%
87,4%
8,1%
8,0%
111,8
%
7,0%
125,6
%
6,5%
150,6
%
5,5%
422,5
%
2,0%
406,0
%
2,0%
545,3
%
1,5%
560,9
%
1,5%
1-Op Tax Rate
Operating
(EBIT/Revenues)
Capital Turnover
Efficiency
Operative Margins
Liquidity Ratios
CAPEX
GCF/CAPEX
CAPEX/Revenues
APPENDIX 3 - DCF ASSUMPTIONS
Risk Free Interest rate
10y Euro Interest Rate Swap
1.94%
Country Risk Premium
Italy 10y CDS yield
214 bps
Europe 10y CDS yield
160 bps
North America 10y CDS yield
45 bps
Japan 10y CDS yield
90 bps
China 10y CDS yield
145 bps
Weighted Average with respect to sales
140 bps
Market risk premium
A. Damodaran estimates
4.96%
Beta
Beta Yoox vs FTSE MIB (EUR)
0.71
Beta Yoox vs EuroStoxx 50 (EUR)
0.8
Beta Yoox vs S&P 500 (USD)
1.21
Beta Yoox vs Nikkei 225 (JPY)
0.95
Beta Yoox vs Shanghai Composite Index (CNY)
0.63
Beta Yoox vs MSCI World Index (USD)
1.22
Weighted Average with respect to sales
0.89
Cost of Equity
Actual: 7,8%
Target: 7,8%
Cost of Debt
BNL
EURIBOR 3M + 1.20%
Banca Sella
EURIBOR 3M+ 2.3%
UniCredit
EURIBOR 3M+ 2.2%
DDL
3.99%
11.02.2014
15
Yoox Group
Total weighted
2.17%
Tax Rate
27.50%
After Tax Cost of Debt
1.57%
D/E
Actual: 1.53%
Target: 0%
WACC
Actual: 7.7%
Target: 7.8%
Country
Tax Rate
Description
Italy
31.40%
IRES (Italian Corporate Tax)
European Union
22.60%
Average European Corporate Tax
North America
33.00%
Average North America Corporate Tax
Japan
38.01%
Average Japanese Corporate Tax
Other Countries (Asia)
22.89%
Average Asian Corporate Tax
Yoox Marginal Tax rate
Minerva Capital
2009
2010
2011
2012
2013E
2014E
2015E
2016E
2017E
2018E
2019E
30.60%
29.62%
30.44%
29.97%
30.00%
30.00%
30.00%
30.00%
30.00%
30.00%
30.00%
APPENDIX 4 - MULTIPLES ANALYSIS
MULTIBRAND
Thousands €
EV/Sales
currency
EV/EBITDA
P/E
exchange
2012
2013E
2014E
2012
2013E
2014E
2012
2013E
2014E
Amazon.com
USD
NASDAQ
1,75
2,33
1,67
37,68
43,47
23,32
0,00
695,69
85,16
Ebay
USD
NASDAQ
4,34
4,12
3,48
14,95
13,85
10,68
25,29
25,64
17,73
ASOS
GBP
LSE
3,34
5,01
5,07
33,10
56,91
58,14
63,73
94,88
98,52
Overstock.com
USD
NASDAQ
0,22
0,45
0,21
8,59
19,05
6,79
22,88
8,48
17,34
Vipshop holdings
USD
NYSE
0,89
3,11
1,83
n.a
88,46
35,44
n.a
95,97
47,21
Start Today
YEN
Tokyo
4,85
3,22
5,88
19,03
12,52
18,31
36,19
23,48
31,57
Average
2,56
3,04
3,02
22,67
39,04
25,45
29,62
157,36
49,59
Average Adjusted
2,58
3,20
3,01
22,36
33,32
21,94
28,12
59,99
45,42
Median
2,55
3,17
2,66
19,03
31,26
20,82
25,29
60,26
39,39
MONOBRAND
Thousands €
EV/Sales
currency
exchange
EV/EBITDA
P/E
2012
2013E
2014E
2012
2013E
2014E
2012
2013E
2014E
Prada
EUR
Hong Kong
3,66
5,04
3,94
12,39
15,91
12,08
21,68
27,00
21,57
LVMH
EUR
Euronext
2,67
2,54
2,28
10,67
9,90
9,10
17,85
19,30
16,51
Hermes
EUR
Euronext
6,58
6,45
5,87
18,54
18,11
16,52
31,39
30,59
27,85
Richemont (31/03)
EUR
Swiss
2,56
3,02
3,33
9,50
10,88
12,26
16,75
16,74
17,86
Average
3,87
4,26
3,86
12,78
13,70
12,49
21,92
23,41
20,95
Average Adjusted
3,17
4,03
3,64
11,53
13,40
12,17
19,77
23,15
19,72
11.02.2014
16
Yoox Group
Median
Minerva Capital
3,17
4,03
3,64
11,53
13,40
12,17
19,77
23,15
19,72
Thousands €
currency
exchange
2012
2013E
2014E
2012
2013E
2014E
2012
2013E
2014E
Yoox
EUR
Borsa Italiana
1,79
4,39
3,71
20,97
47,42
38,45
66,94
151,36
117,49
Portfolio (averages)
2,96
3,38
3,26
19,67
31,95
21,75
27,28
119,85
41,43
Portfolio (adj.averages)
2,76
3,43
3,19
19,08
27,74
19,15
25,59
49,68
38,09
11.02.2014
17
Yoox Group
Minerva Capital
APPENDIX 5 - BUSINESS DESCRIPTION
Why Yoox in Italy?
The particular Italian context and the potential of the “Made in Italy” brand have allowed Yoox to develop in this country. Italy has always been seen
as the country of fashion, also thanks to its history and the development of arts; this may be one of the reasons why Yoox has no direct competitor
specialized on the same sector of luxury and fashion.
The strong brand identities, their recognition on the market, the quality of manufacturing, tradition, creativity and the focus on style have gone hand in
hand with innovation and communication strategies, thus promoting the uniqueness of the “Italian art of living".
11.02.2014
18
Minerva Capital
Yoox Group
APPENDIX 6 - DISCOUNT RATE
A: Revenues not country related
B: Net revenues on services provided
A-B: delivery cost charged on net revenues
from selling merchandize
Percentage of customer discount on Gross
revenues
APPENDIX
2008
1387
5232
2009
2597
8774
2010
4177
12385
2011
6292
16570
2012
9507
19821
3845
6177
8208
10278
10314
4,00%
4,31%
4,07%
3,74%
2,90%
7-
DELIVERY COST
2008
2009
2010
2011
2012
Net sales on goods sold
96218,0
143443,0
201903,0
274617,0
356103,0
Return's rate
26,60%
26,80%
26,30%
25,90%
26,30%
Returns total value
34.937
52.411
72.034
96.070
123.648
11.02.2014
Gross Revenues
131342,1053
195563,4328
273893,5361
370926,6409
470144,4867
Total discounts value
35124,1
52120,4
71990,5
96309,6
114041,5
% discounts
26,74%
26,65%
26,28%
25,96%
24,26%
19
Yoox Group
Minerva Capital
APPENDIX 8 - INDUSTRY OVERVIEW AND COMPETITIVE POSITIONING
CONSUMERS ARE MAD ABOUT ECOMMERCE AND MCOMMERCE
EUROPE
Ecommerce
Ecommerce boom has lead online revenues to grow by 19% in 2012, reaching €311,6 billion.
European ecommerce market is clearly dominated by UK, Germany and France; total online spending B2C in these countries amounts to 61% of
whole Europe and to 69% of UE-28. As Internet economy is growing
faster than real economy, the 3,5% GDP share (estimated for these
three countries) related to ecommerce is going to double by 2016 and
to triple by 2020. Another important fact is that the total number of
ecommerce shops reached 550000, taking the yoy growth from +15%
in 2011 to +20% in 2012; this is due to the fast development in
“ecommerce emerging countries” like Italy, Spain, Poland, Ukraine,
filling the gap with the more mature Central and Northern European
markets.
Russia is growing at high rates (+37%), reaching €12,6 million
revenues and 4% of total European market share.
In Italy, in particular, interest about online shopping is increasing, both
from the consumers’ and from the producers’ side. As more people
shop online and gather information before going to physical shops,
more entrepreneurs are investing on websites in order to increase
visibility and proximity to the customer.
Source: Online research
M-Commerce
Data released at the end of 2013 by comScore revealed that in Europe the mobile retail audience in August 2013 amounted to 31 million people, that
is 20% of smartphone owners in the EU5 (France, Germany, Italy, Spain, UK). The numbers are quite different state by state; Italy has been the
second-fastest growing, +66,1% with respect to August 2012, while Spain has reached +66,5%. This country shows also a great growing potential, as
only 12,2% of smartphone users visit ecommerce websites; France is the unique country doing worse, with 11,7%.
UK had the lowest yoy growth (+29,5%), but its mcommerce audience represents 27,6% of smartphone owners (9,7 million visitors of online retail
websites) and this population is beaten only by Germany (10 million visitors).
In August 2013, the number of Europeans who had made an mcommerce transaction amounted to 22,8 million (+37% yoy, from 16,6 million).
Q1 2013 registered $5,9 billion mcommerce spending; Q2 $4,7 billion, with a yoy of 24% over Q2 2012.
Do Europeans prefer smartphones or tablets? They use more smartphones in general, as 6% of sales comes through these devices (against 3,5%
through tablets). However, tablet purchase value tends to be 20% higher, probably because of the supposed higher income of tablet owners versus
non-tablet
ones.
USA
Ecommerce
Forbes estimates for the US ecommerce $262,3 billion revenues in sales in 2013, +16,4% yoy (+16,2% yoy from 2011 to 2012). Forecasts state that in
2017 sales should amount to $440 billion, CAGR +13,8%.
What drives ecommerce in the US are of course eBay ($14,07 billion revenues in 2012) and Amazon ($61,9 billion revenues in 2012). Their growth
rates are still very good, in some sectors; for example, electronics and general merchandise on Amazon have registered an increase of 27,8% in H1
2013, after +34,5% yoy (2011-2012).
EBay’s commerce volume grew 20% in Q1 2012, with its mobile traffic growing 90% in Q2.
Holiday sales (November-December) represent more than 20% of total annual US e-trade sales.
Mcommerce
In 2012, 50% of U.S. mobile phones was represented by smartphones and 66% of people of age 24-35 own this kind of device. By 2015, it has been
forecasted that smartphones will be 81% of mobile phones.
Mobile commerce in 2012 accounted for 9,2% of US ecommerce sales, a share increasing from 2011 value (5,4%). By 2017, mcommerce sales are
expected to reach $100 billion (almost +28% CAGR).
Amazon is the first mobile commerce retailer, with 4$ billion mobile sales in US in 2012; the second biggest retailer is Apple thanks to apps, music,
videos, ebooks. Other important businesses are the fashion retailers Gilt Groupe and RueLaLa.com. ComScore researches revealed that 80,6% of US
smartphone owners used their devices to access retail content; Amazon sites had 49,6 million visitors in July 2012 (46,6% of total audience), followed
by eBay (32,6 million, 30,6%), Apple (17,7 million, 16,6%), Walmart (16,3 million, 15,3%) and Target (10 million, 9,4%).
11.02.2014
20
Yoox Group
Minerva Capital
CHINA
Internet Penetration Rate & Ecommerce
As technological development is spreading in China, Internet diffusion is also increasing. In 2012 every 1.6
seconds a Chinese has become a new Internet user and the penetration rate is now about 42.1%; also the time
each individual is spending online has increased from 18.7 hours per week in 2011 to 20.5 in 2012 (against 32
hours in the USA).
The Chinese Internet population is young (54% of it is under 30) and this age group represents the favorite
target of Yoox Group; the average age is 25 years, while in the USA it is 42, with 55.8% of male users. The
majority of the Internet population is concentrated in urban areas (72.4%, 408 millions, against 27.6% in rural
areas).
The total value of online sales in 2012 was 210 billion dollars (+64,7% with respect to 2011), while in the USA
it amounted to 226 billion dollars, with a yoy growth of 15.8%. Online shopping is an activity practiced by
42.9% of the Internet population (242 million of people). Among the B2C websites, Amazon.cn is the fifth by
number of monthly visitors, and it is the only non-Chinese website in the top ten.
E-commerce in China presents big opportunities, as the country grows by 4 million users per month. It has
been forecasted that, by 2015, 44% of Chinese urban population will have shopped online, against 23% in
2010, and by that date 7.4% of Chinese total retail value will come from e-commerce. On average, shipping
costs amount to 1 dollar per kilogram, against 6 dollars in the USA for the same weight. Customer surveys
have shown that Chinese consumers shop online because of many reasons; 28% of the online shopper prefer it
for the “anytime, anywhere” opportunity, while 25% appreciate the low prices and 18% find it convenient. 7%
of the shoppers say that it is easy to compare prices and 4% enjoy the vast choice offered.
Mcommerce
More than 460 million of the Chinese population access Internet through their mobile phones; they are 56.6%
male, of age between 18 and 35 in 73.3% of the cases, educated (high school: 10.4%; junior college: 24.4%;
bachelor: 51.5%), they access Internet more than once a day (71.8%), frequently while waiting for transports
(54.2%), while communicating (47.3%) or at home (46.6%). 17.1% of mobile Internet users do online
shopping.
JAPAN
Ecommerce
Online revenues are still expected to grow in the next few years, in Japan. According to eMarketer, B2C sales were under $100 million in 2010, but
they reached $125 million in 2012 and are expected to grow up to $175 million by 2017. Japan is the third country for broadband Internet population,
behind US and China.
An important factor in Japan is social networking; Japanese consumers are connected with brands on social media, but more in the purpose of gaining
coupons and free products than of being in touch with the identity of the producer.
The most important ecommerce website in Japan is Rakuten, famous because it creates a unique shopping experience letting producers customize
their products and communicate directly with customers.
Mcommerce
The Japanese Ministry of Internal Affairs & Communications reports a big increases in the mobile shopping segment; in 2011, mobile commerce
revenues amounted to ¥1,17 trillion ($11,5 billion), +16,2%. The most important share was represented by merchandise (¥583 billion, that is $5,9
billion, 49,8% of the total), which grew 32,9% yoy.
The most important online fashion retailer, Zozotown, reported that 40% of sales in 2012 where proceeded by mobile devices. This phenomenon can
be explained by the massive use of shopping apps; some services are mobile-only, as their target is constituted by under-30 who often use mobiles as
their unique Internet access point. An important example of this trend is Muse, a flash-sales site targeted on young women which sells casual fashion
brands; it has been launched at the beginning of 2012, but in 2013 it claimed to have 200000 users, with ¥50 million ($510000) sales per month and it
is now focusing on the development of smartphone apps as 70% of traffic and 50% of sales comes from mobile devices.
Online fashion in Japan seems to have a great appeal to young people; the service iQon is designed to allow customers to choose “looks”, that is
clothing and accessories from different fashion brands which can be shared among users. Each product is linked (through a fee-earning connection) to
a fashion ecommerce site, such as Zozotown. In 2013, iQon has started a collaboration with Yoox in order to offer more luxury overseas products,
thus hoping to attract more users (not only teenagers and people on their 20s, but also under 40 women).
Another important channel to exploit is the connection with social networks; for example, the app Origami allows users to bookmark their favorite
brands and shops. This news service lets people receive updates from their bookmarks about products, promotions, events and so on, but it also
connects these updates directly to ecommerce websites, in order to make faster the purchasing process and to increase the visibility of the brand.
MIDDLE EAST
Ecommerce
Recent studies have shown that ecommerce market in the Middle East has grown 29% in revenues ($7 billion in
2011, $9 billion in 2012) and 20% in consumers (30 million people in 2012); 15$ billion revenues are forecasted
by 2015. This huge increase has been due to growth of online population (new consumers); to the online
appearance of local retailers, allowing customers to buy on the internet what before they could have found only
in a specific region (establishment of a sophisticated structure and offer); to the increasing presence of
international players; to the massive increase of mobile commerce.
A peculiar tendency is cross-border ecommerce, because of the limited choice of the local market. Customers
buy in US (35%), Asia (30%), Europe (25%), leaving only the remaining 10% to the intra-regional e-trade.
Mcommerce
10% of online transactions are operated through mobile devices, but forecasts report an increase to 20% in 2015
thanks to the spreading of tablet and smartphones. Consumers prefer to use tablets rather than smartphones, but
high barriers are represented by non-user-friendly platforms, which make more difficult for the customer to
understand how to use the portal or purchasing procedure, and lack of security while operating transactions.
11.02.2014
21
Yoox Group
Minerva Capital
LATIN AMERICA
Ecommerce
Brazil (population: 198,7 million) is the 5th biggest internet market in the world and the biggest in Latin America, with an online population of 99
million users, 60% of which are less than 34 years old. They spend more than 27 hours per month online (global average: 24.7), most of all for social
networking, ecommerce, price comparison sites, videos and gaming. Online total sales have increased by 20% from 2011 to 2012 (US$9,2 billion to
US$11 billion) and an increase of 28% has been forecasted for 2013. Brazil has also been victim of trends like American Black Friday (US$ 110
million of online revenues on November 23rd, 2012) and holiday online shopping (+18% during Christmas 2012).
Studies conducted in Brazil have shown that online retail is appreciated for its being convenient, making possible to compare prices easily and to buy
when there is not an adequate physical store, but it has the drawback of forcing people to wait and not touch the item.
The potential growth lies in the improvement of internet penetration rate (currently 49%, half the one of the USA) and the increasing usage of
smartphones is going to help this process.
Argentina’s ecommerce total sales have increased 32% from 2011 to 2012 (US$2,3 billion to US$3,3 billion) and it is the country with the highest
digital buyer penetration rate in Latin America (online purchases were made by 43,9% of Argentina’s users, higher than 34% in Brazil and 19,6% in
Mexico).
Mexico’s ecommerce total sales have increased by 46% from 2011 to 2012 (US$4,2 billion to US$6,2 billion); 23% of online purchases are
concentrated on clothes.
Apart from the major countries, also the other regional players are becoming more and more important in this field; for example, Chile’s ecommerce
sale are estimated around US$1,7 billion in 2012. An important feature of this market is the fact that 38% of online transaction does not concern
goods but tax payments, 29% are travel related and 17% retail related; Chile has also a high percentage of Internet users engaged in ecommerce
(65%).
In 2012, Colombia has almost reached the US$2 billion threshold of online e-trade revenues.
Mcommerce
93% of Brazilian mobile shoppers use smartphones or tablets to gather information on products, while 63% find mobiles useful for price comparison;
social networking is also an important issue, for example for what concerns sharing information or photos. Mobile sales have increased from 5% in
2011 to 10% in 2012; the local Camara Brasileira de Comércio Eletronico has forecasted an incredible growth of 657% of mobile commerce in 2013,
which should have thus reached US$1 billion.
Half of Mexican online consumers (47%) have made purchases through their mobile devices in 2012; an increase in this percentage is forecasted in
the next few years.
11.02.2014
22
Yoox Group
Minerva Capital
APPENDIX 9 – INDUSTRY OVERVIEW AND COMPETITIVE POSITIONING
VALUE DRIVERS
Among the portfolio of brands served by Yoox in the mono-brand sector, only a few
are listed on the stock market: Barbara Bui (Bourse de Paris, since April 2000); Aeffe
(Borsa Italiana, July 2007); Brunello Cucinelli (Borsa Italiana, April 2012); Moncler
(Borsa Italiana, December 2013).
Barbara Bui is a French stylist, active in Paris since 1983.
Aeffe SpA is an Italian company which includes Moschino, Pollini (leather industry)
and which produces and distributes on license brands like Jean Paul Gautier and
Blugirl.
Brunello Cucinelli is an Italian maison; specialized in cashmere, it is one of the most
exclusive brands in the international luxury casual chic sector thanks to the strength
of the “Made in Italy” feature and the craftsmanship of its production.
Moncler is a French clothing company specialized in jackets and sportswear; founded
in 1952 by René Ramillon, it has been bought in 2003 by the Italian entrepreneur
Remo Ruffini and it is currently worldwide sold. Mediobanca estimates online
revenues will grow from €4 million in 2012 to €20 million in 2016 (CAGR 49%),
which means that online traffic will contribute for 2,3% in 2016, against the current
1% of group revenues.
These four brands represent a fashion-portfolio which can be seen as incorporated
into Yoox stocks; each of these brands is a value-driver for the company, and their
revenues are strictly connected through the revenue-sharing mechanism. Even though
each brand’s growth is associated to the whole business (both physical and online),
we can see a clear pattern in the paths followed by Yoox and the three listed stocks (Moncler lacks of data, because of its recent appearance at Piazza
Affari).
Total revenues
Aeffe
Barbara Bui
2008
300,700
37,362
Brunello Cucinelli
2009
222,900
-25.87%
30,241
-19.06%
158,135
2010
225,100
0.99%
29,282
-3.17%
203,599
0.05%
2011
252,500
12.17%
31,897
8.93%
243,448
0.05%
363,700
112,450
10.84%
165,048
46.77%
233,511
41.48%
Moncler
Yoox
101,450
2012
261,100
3.41%
31,794
-0.32%
281,351
0.05%
489,180
34.50%
316,875
35.70%
2013
196.900*
-3.80%
253.386*
14%
456,000
21.00%
*2009 refers to the yoy growth 2008-2009. For
2013 we have used data from Q4 for Yoox and Q3 for Aeffe and Brunello Cucinelli, underestimating the usual positive effect of the fourth quarter and of holiday sales.
11.02.2014
23
Source: Bloomberg
Yoox Group
Minerva Capital
APPENDIX 10 - PORTER ANALISYS
Porter Analysis
Threat of
Substitute
Products
Competitition
in the industry
Treat of new
Entrants
5
4
3
2
1
0
Bargaining
Power of
Suppliers
Bargaining
Power of
Buyers
Source: Team Estimates
Treat of new Entrants: 4
- Trading volumes and achievement of a large market share, strategic for economies of scale for distribution costs;
- Automated chain in the Bologna Interporto to add new merchandize to inventory; faster photographing and cataloguing. Even though the extension of
Bologna’s warehouse required the commitment of great resources, it was needed to support orders and stocks’ growth until 2019, and to sustain delivery and
order processing’s efficiency for the following years.
- Exclusives with brands only in the monobrand sector (for the development and maintenance of the website); the multibrand needs to be more flexible and it
has no exclusives, as the same brands are sold also on other online stores.
- Software licenses may be important, but the technology market has a fast evolution and licenses do not ensure that a certain service can be offered only
through a specific solution; new platforms can be easily developed, thanks to the increasing spread of knowledge and to the diffusion of IT and IT universities.
Also applications for mobile devices can be easily developed.
- Safety and realiability: the consumer needs to feel safe when doing an online transaction and this happens more often when he deals with established and
well-know institutions he can trust.
Bargaining Power of Suppliers: 4
- Economies of scale: achieving the a sufficient number of orders, Yoox obtained higher discount from suppliers to reduce delivery costs.
Yoox's main partners are UPS for global delivery, Fedex in China, Yamato in Japan, Bartolini and UPS in Italy. The table shows the impact of delivery costs
on a customer's total bill, in percentage points.
This information is a sign of how much the company has reduced delivery costs in the last years, assuming that Yoox maintained the same price policy over
the given time period. Even though we drop this assumption, we can observe the same trend by taking into account the costs of services that are included in the
costs of sale. This value is mostly made up of delivery costs, and, even if they can't be identified exactly, its percentage on revenues has decreased over time.
- Good relationships with brands: YOOX's Group acquire important partnership, building up loyalty and respect among partners.
Bargaining Power of Buyers: 2
Yoox can't offer a great discount on the catalogue because its price policy is settled in line with the physical stores, hindering the expansion of customers’
segments.
Nonetheless Yoox has been able to strengthen its position on the market because it has reduced the percentage discount granted to customers without losing
volumes.
Competition in the Industry: 4
The competition comes in two sectors: service provision, outlet stores together with other online fashion store.
- As for service provision: YOOX was able to exploit its internal synergies: its pre-existing relations with web advertising suppliers, established previously for
the multi-brand business.
- As for online stores, Yoox is able to reduce costs and obtain a better marginality due to Online Partnerships with the brands whose collections are sold in the
Multi-brand Stores.
Threat of Substitute Products: 2
- Other online retailers: lower-end (for example, Zalando, Net-à-Porter)
- Subscribers-only portals: only members of the “club” are invited to special offers (for example, Privalia, Vente-Privée, Gilt, Amazon BuyVIP). In this way
they focus on customer loyalty and on an higher conversion rate than Yoox. Shoppers feel part of an exclusive reality dedicated only to them, so they are more
willing to make an order because of this sense of "elegibility", particular of luxury market.
- Physical substitutes: outlets, department stores, flagship stores; the "customer experience" is one forte of luxury brands against the lower-end stores in the
market. However, online services have many pros, for example the wider availability from the whole catalogue, but these sites should be improved in order to
enrich the shopping perception; a major change could lie in the possibility of seeing many photos of a product, in particular clothing, but on different models in
order to fit the different shapes of customers.
11.02.2014
25
Yoox Group
Minerva Capital
APPENDIX 11 - AOV AND RETENTION RATE
Monthly
unique visitors
('000)
Numbers of
orders ('000)
AOV (without
VAT)
Numbers of
sctive
customers
('000)
Conversion
Rate
2008
2009
2010
2011
2012
2013
forecasted
3,700
6,400
8,600
10,400
13,000
13,211
The rapid growth of the group over the years and its expansion
among different markets. In five years the number of visitors has
more than tripled, and the conversion rate didn't fall under 7%.
This is a signal of efficiency and it shows that the investments in
new online stores don't waste resources.
To better understand these results, we should make a comparison
with some important competitors: Amazon, Asos and Vipshop.
These three businesses are actually quite different from Yoox:
167
170
179
180
206
219
Amazon is a large scale online retailer and it is mostly known as a
book seller, even if almost every kind of item can be found in its
319
478
612
808
947
1070
catalogue. The website attracts a very large variety of customers,
and it's not specific to one particular sector.
On the other hand Asos is closer to Yoox for type of business. In
fact it is an online fashion retailer, but it is bigger and it is focused
8.62%
7.47%
7.12%
7.77%
7.28%
8.10%
mainly on UK, USA and Australian markets. As a results, the
fashion style offered is mostly dedicated to the Anglo-saxon's
fashion, which differ from the European continent's one.
Vipshop is a Chinese company which offers "Everything Must Go!"
sales on web. The costumers have the opportunity to buy
merchandise at a very discounted price for a limited amount of time. Its catalogues contend clothing, shoes, cosmetic and accessorize from both European and
Chinese Brands. Vipshop was established in 2008, so its actual growth values are conditioned to its recent entry into the market.
Due to these differences, the conversion rates of these competitors can't fit on Yoox's business, nevertheless they provide a useful comprehension insight on
the online retailer market.
In 2011 Asos registered a conversion rate of 24,3%, and in 2012 it increased is up to 25,0%. Amazon instead in 2012 recorded a rate of 13,4%. These results
seem to prove that Yoox doesn't compete with the others players in the market. However in order to have a comprehensive overview, it's necessary to include
in the analysis the AOV of the orders. As shown in the table, the average value of the Yoox order value reaches a peak of €206 in 2012 (in forecast on 2013,
219). Amazon instead managed in 2012 $ 48 (€35,58), while Asos had an average basket value of £67,5 (€78,32) in 2011 and £63,58 (€77,48) in 2012,
Vipshop $35,7 (€23,24).
780
1148
1523
2055
2330
2735
Providing a deeper comparison with Asos:
Asos
Yoox
50.00%
100.00%
40.00%
80.00%
30.00%
60.00%
20.00%
40.00%
10.00%
20.00%
0.00%
0.00%
-10.00%
2010
2011
Growth of conversion rate
Growth of unique visitors
2012
Growth of AOV
2013.00
-20.00%
2010
2011
Growth of conversion rate
2012
2013.00
Growth of AOV
Growth of unique visitors
The table shows that, excluding from 2011, there is a negative correlation between Growth on conversion rate and the growth on AOV, according to different
retailers and markets.
These data give information on about how the growth of unique visitors impacts on the AOV growth and on the conversion rate.
YOOX has collected very brilliant results in increasing the AOV and at the same time in sustaining the retention rate. Except for 2011, the usual trend
registered is a negative correlation between growth in conversion rate and in AOV. In 2013 YOOX overperformed and obtained a positive growth both in
conversion rate and in AOV.
The values of the last years confirm that the AOV policy is perfectly on target, in fact the choice of online partners, is made by taking into account the high
average order value, instead of the high number of orders. This orientation performs well not only by increasing the value of revenues, but mostly by reducing
the bearing of sales cost on revenues. Given a fixed cost of delivery, it would be more profitable to send a high priced item rather than a lower.
11.02.2014
26
Yoox Group
Minerva Capital
APPENDIX 12 - CUSTOMERS
Through the multiple channels of mono-brand stores and multi-brand in- and off-season stores, Yoox targets different kinds of customers:
• Brand lovers: loyal to the brand and sensible to new trends, they prefer buying on the dedicated monobrand stores; thecorner.com and shoescribe.com allow
them to compare and choose among their favorite maisons;
• Fashion savvy: quality and price are two important features that the savvy takes in mind while comparing brands on yoox.com; the in-season trend
component is less important;
• Bargain hunters: price is the first-dimension choice for them; yoox.com exploits this propensity creating even more discounted special offers, like bi-annual
sample sales.
Apart from the interest in fashion, the ideal customer of YOOX belongs to a new generation of Internet-aware people, hyper-connected and used at living with
new technologies, such as tablets and m-commerce. As the demand for more sophisticated online experiences increases, it is important to ride the wave and to
offer new customized opportunities. Mono-brand online stores and thecorner.com offer the same product in the physical stores, at a price aligned to them; the
increase in the e-commerce interest is then due to social and psychological recent developments, for example:
• increasing speed required to all the processes, starting from social interactions through social networks;
• possibility of looking for the desired product from any location and in any time, checking out the whole catalogue and not only the in-store assortment
(which can depend on the buying choices of the singular shop);
• possible distance of the customer to the physical shop (mono-brand stores are usually located in big cities, and small cities present only authorized reseller
which do not own a large assortment);
• lack of time during opening hours (office jobs).
• curiosity: lower-budget buyers may not want to enter the shop because of lack of resources, but they may admire the brand identity and may have a look at
the website, eventually finding some lower-price product;
• possibility of shopping from different markets worldwide and loyalty of a customer to a brand not sold on his/her local market. Internet allows him/her to
keep in touch with new collections and to acquire them without travelling.
One important drawback of online shopping is that the customer loses the part in which he/she inspects the product, tries it on and experiences the real
excitement of handling something wanted, without waiting or relying on payment and delivery systems. Online shopping websites should exploit the
crosschanneling opportunities in order to correct for this lack of human contact.
APPENDIX 13 - CROSSCHANNELING
Crosschanneling marketing implies the use of one marketing channel to support or promote another channel; this allows companies to be more effective in
interacting with their customers. Across geographical markets, there is a strong correlation between e-commerce maturity and cross-channeling development;
in particular, USA, UK and Japan are leading this new technological change.
Luxury brands could exploit these opportunities, increasing their value proposition by connecting distribution channels, because they could use their sector
experience and enrich it, personalizing interactions and increasing customer loyalty (thanks to higher frequency and spending); these factors may help in
increasing sales in the medium and long term, both online and offline, magnifying brand identity thanks to the various customer touchpoints. Crosschanneling
may also increase the brand proximity to the customer, as websites are accessible anytime and anywhere, and increase the effectiveness of marketing
campaigns, leveraging online the larger offline customer base.
Crosschannelling may integrate the on- and off-line shopping experience of customers, integrating database, loyalty programs, the possibility of using pre-paid
gift cards, while allowing the customer to book online a product or an in-store tailoring appointment; moreover, the presence of brands and their visibility can
be augmented, making the customer feel part of this luxuous reality, for example providing stream-videos directly from the catwalk.
Yoox is going to focus on developing cross-channeling, in particular within the JV with Kering and operations with some Italian brands. These operations
include: fashion advice from experienced consultant that assist the customer while shopping online database integration; click&collect (service which allows
to buy or just reserve online and pick up the product in stores); click from store (the process of buying online but from an in-store device); return in store; click
and exchange (after the online buying process, return and exchange can happens physically in store); check in-store availability online; buy on call supported
by fashion consultants.
11.02.2014
27
Yoox Group
Minerva Capital
APPENDIX 14 - CRITICALITIES
Yoox’s possibilities to grow in new markets are related to the expansion of the sector in local regions; this growth can be boosted improving Internet
penetration rates, but also by the diffusion of smartphones and tablets and the spreading of e-trade tendency.
Luxury has always represented a status quo for people who could afford it; valuable products gain this status for their quality, but more for their perceived
intrinsic value (tradition, identity, passion, etc.). Luxury goods are considered Giffen goods, or Veblen goods, whose demand increases proportionally to their
price. These psychological factors are important in driving demand because in the next
few years two macroeconomic tendencies are going to move the markets: the first one
is related to the end of the financial crisis, especially in European countries; the second
is the emerging of new countries and of a new middle class.
As wealthy countries get out of the crisis (improving their GDP growth levels and
encouraging consumer confidence), their purchasing power is expected to grow and this
can have positive effects on the luxury market.
+In emerging countries, in recent years, more and more workers are getting out of the
poverty status, thanks to the development of the economic system and to the
improvement of the social state. In China, modern shopping malls are being opened
throughout the country and even rural classes are evolving from being the low-end
markets to the middle and high-end. Rising wages and an ageing population are going
to shift households’ balances towards consumption rather than savings. Chinese
consumers are more oriented
towards expensive goods; their
Source: The Economist
taste for these products comes
from the emulation sentiment
they feel while watching online
American TV series and the
Source: The Economist
consultancy IDEO has found
that many young migrant
workers earning less than $830 a month spend their monthly wage on an Apple iPhone. However,
Chinese consumers are very unstable and they do not show strong loyalty to brands but they prefer to
switch rapidly from one to another. The market is very competitive, as consumers can find on their
shelves more than twice as many brands than in other countries and they change their minds so fast it is
impossible to keep someone to its first choice. Luxury is important in a culture because it conveys
messages about the social status of the owner and the choice of the specific item shows a particular
attention for certain values; many leading brands are now promoting their history and craftsmanship in
order to display the cultural heritage incorporated in the brand itself. Unfortunately, many Chinese have
declared they would prefer to buy products which were designed for China and incorporate their own
identity (source: The Economist).
Consumers have also become more aware of price dynamics and they often check details information
online; for example, in 2009 only 40% of people realized that prices in the mainland were at least 20%
higher than, for example, in Hong Kong, but in 2010 the percentage was 66%.
McKinsey estimated that by 2015 China will account for 20% of global luxury sales, thanks to
Source: McKinsey &Company
urbanization, increasing wealth, spread of pos and web investments.
Top 3 key buying factors in luxury purchase
Source: McKinsey &Company
11.02.2014
28
Yoox Group
Minerva Capital
APPENDIX 14 - FASHION TRENDS
To make our considerations on the market, we compared YOOX's growth rates with other players in the luxury market. We
used historical revenues of Prada, Hermes LVMH until 2012, for 2013 we use projections based on growth ot 3th quarter.
In particular for the Italian market, we compared just with Prada's growth because it is the only peer for which data are
available.
2009
YOOX
PRADA
37.00%
-14.33%
YOOX
Luxury firm
50.32%
-7.53%
YOOX
Luxury firm
57.36%
1.10%
YOOX
Luxury firm
90.54%
0.53%
YOOX
Luxury firm
59.41%
14.59%
11.02.2014
2010
2011
Growth in Italy
23.82%
17.13%
19.18%
13.30%
Growth in Europe
38.41%
37.46%
14.74%
15.36%
Growth in USA
63.98%
41.55%
15.99%
13.09%
Growth in Japan
51.84%
47.60%
6.44%
5.19%
Growth in Rest of the World
160.42%
170.62%
23.19%
28.73%
2012
2013
2.38%
18.56%
20.07%
4.00%
27.27%
-1.91%
21.38%
6.96%
36.47%
24.49%
26.11%
-2.19%
56.76%
18.30%
10.68%
-12.51%
139.66%
8.76%
49.39%
13.67%
29
Yoox Group
11.02.2014
Minerva Capital
30
Yoox Group
Minerva Capital
APPENDIX 15 - POTENTIAL UPSIDES
NEW MARKETS
After the breakeven in China, Yoox is ready to attack and conquer new markets; the next targets will be Middle East and Latina America.
Middle East seems to offer more immediate chances, as it closer to the current physical hubs (Europe, China), infrastructures (Internet, distribution channels)
are more developed and average GDP per capita is higher, which can measure the social environment (though an indicator of inequality, like the Gini
coefficient, is missing) and the propensity of the population towards fashion and luxury.
If we take the percentage of households above 35000 US$ as an indicator of purchasing power (*Egypt: above 25000$), we can see that the percentages and
the growth rates are quite different, manifestation of the fact that these areas present big opportunities but they are also connected with a wide variety of
country-specific issues (income inequality, GDP growth, inflation, political stability).
Middle East presents very different situations; Egypt, Turkey and Iran are the more populated countries, but they do not present upper-income percentages as
high as those of Saudi Arabia (petroleum-based economy).
Latin America presents relatively low above-$35000 per household percentages, but growth rates have been quite important and they are expected to keep up
the pace, symptom of the re-birth of the whole area.
Free-trade agreements still do not exist among American, European and Middle-East countries; in the last years, several projects have been designed in order
to create free trade areas (for example, EU and US with Middle East, or US with Latin America) but nothing has been signed. Agreements of this kind may
boost Yoox’s expansion because they would allow the company to exploit its present physical hubs and to trade without import quotas and without making
huge initial investments, which may take place only after a period of market penetration and settlement of the business.
Source: Bloomberg
11.02.2014
31
Yoox Group
Minerva Capital
11.02.2014
32
Yoox Group
Minerva Capital
APPENDIX 16 – INVESTMENT RISKS
OVERVIEW - PROBABILITY AND IMPACT OF RISKS
Source: Team estimates
11.02.2014
33
Yoox Group
Minerva Capital
APPENDIX 17 - SOCIAL MEDIA PRESENCE
The table shows how Italian ecommerce retailers perceive social media as effective (data gathered in 2013).
Yoox should increase its social media presence in order to gain more
visibility: customers are not aware of the brand “Yoox” and do not pay
attention to the official pages on the social media. The potential audience on
Facebook, Twitter and so on is growing and Yoox should exploit these
channels.
Facebook: 1.11 billion people using the site each month, reported in January
2013, +23% yoy; 1.23 billion reported in January 2014.
Twitter: 200 million users (active February 2013), 500 million (total in
October 2013).
Google+: 540 million users (active October 2013).
YouTube: 1 billion users, 4 billion views per day (March 2013).
Which social media are effective?
80%
70%
67%
60%
50%
37%
40%
33%
30%
20%
20%
15%
11%
5%
10%
4%
3%
7%
0%
Survey conducted in 2013 among Italian B2C retailers
Facebook - Likes
Youtube Channel
Subscribers
Twitter
Visualizations
Google+
Followers
Yoox
155445
1485
1302010
22442
3413
Armani
5444125
19195
14128031
1168601
1111656
Dolce&Gabbana
7857740
46756
26514134
1885387
799264
Yves Saint Laurent
1886284
/
/
1810090
1172
LVMH
157458
480
142521
12686
/
Hermes
1563732
10172
1699754
Not Certified
80738
Dior
12807071
97589
102852747
4149531
1212149
Louis Vuitton
16114468
64754
67552196
2409680
101369
Prada
3255676
26498
14655984
51528
10301
Amazon.it*
2971550
3185
447676
Ebay
7040571
14749
6587942
310221
only regional
Net-à-Porter
1205929
36481
5993565
574565
678181
Zalando
680895
1421
1912628
10168
57453
11.02.2014
34
Yoox Group
Minerva Capital
140000000
120000000
100000000
80000000
60000000
40000000
20000000
0
Facebook - Likes
Youtube Channel Subscribers
Twitter Followers
Google+
Youtube Channel Visualizations
These data show that Yoox should increase marketing costs in order to gain visibility on the social media and find new customers among the new Internetaddicted generations.
An important feature of our society is the constant exposition to advertisements and brands; the average Western consumer sees logos (sometimes the same
one) perhaps 3000 times a day (Source: TheEconomist) but he/she is more aware of how advertising works. This wake up of consciousness has been fostered
also by online communities and rating systems, where people can comment and share their experience, thus allowing other customers to compare the services
(this is what happens on online commerce websites, on social network or on new trends like TripAdvisor). The greater availability of choice, competition and
information has led to an era of skepticism, so brands need to re-discuss their fidelization programs and to re-shape their images. Word-of-mouth
recommendations (“earned media”) are perceived as more reliable than advertisements on “paid media”, so companies should exploit the possibilities offered
by viral marketing and community sharing.
Yoox should gain more visibility on the Internet, which is its battle field; as more satisfied customers report their positive experiences, not only their trust will
increase, but they will also drive the attention of new potential consumers towards Yoox and its websites.
11.02.2014
35
Yoox Group
Minerva Capital
APPENDIX 18 – CORPORATE GOVERNANCE
Board of
Directors
• Chairman and Chief Executive Officer: Federico Marchetti
• Directors:
• Stefano Valerio
• Mark Evans
• Catherine Gérardin-Vautrin
• Elserino Piol
• Massimo Giaconia
• Raffaello Napoleone
Board of
Statutory
Auditors
• Standing Auditors
• Filippo Tonolo - Chairman
• David Reali
• Patrizia Arienti
• Alternate Auditors
• Edmondo Maria Granata
• Salvatore Tarsia
Independent
Auditors
• KPMG S.p.A.
Supervisory
Body
(Decree Law
231/2001)
• Rossella Sciolti - Chairwoman
• Gerardo Diamanti
• Riccardo Greghi
Director in
charge of
preparing
Corporate
Accounting
Documents
Internal
Control
Manager
• Francesco Guidotti
• Riccardo Greghi
APPENDIX GOVERNANCE:
OECD Criteria:
Define foundations for an effective corporate governance framework: 10 (weight:1)
Shareholders' right: 8 (weight:1,6)
Role of stakeholders: 10 (weight:1,6)
Disclosure and trasparency: 8 (weight:1)
The responsibilities of board: 6 (weight:1,6)
TOTAL: 7
11.02.2014
36
Yoox Group
Minerva Capital
We used the Principles of Corporate Governance developed by Organization for Economic Cooperation and Development (OECD).
We assigned a vote 1-10 for each criterion. YOOX's final score is 7 out 10, because we valuate particularly sensible the followings matters:
- regarding Shareholders’ rights: implementation of stock options plans limits the floating shares.
- the Code of Conduct is very well made, but more controls should be applied by Independent Auditors on quarterly results, which have a deep impact on
stock price. Currently supervision is carried on just partially on quarterly and half-year reports.
- great concentration of shares owned by members of BoD.
We used the Standard Ethics Rate (SER) to help us into evaluation. It is issued by a London-based rating company, which measures the level of conformity of
companies to the baseline ethical values expressed in eight different classes: EEE for 'above average' , EE for 'average', E for 'below average'. The rating is
given by following the United Nation, OECD and EU dispositions on "Corporate Governance".
The final weight on the index is given by adding to the class's percentage value the residual part of classes not covered by any firm.
SER
Società
EEE-
ENI
weight
7.779%
EE+
ENEL
6.223%
EE
UNICREDIT
5.056%
EE
PRYSMIAN
5.056%
EE
ASS. GENERALI
4.667%
EE
AZIMUT
4.667%
EE
ENEL GREEN POWER
4.667%
EE
STMICROELECTR.
4.667%
EE
UBI BANCA
4.667%
EE
B. POP. EMILIA ROM.
4.278%
EE
BANCO POPOLARE
4.278%
EE
SAIPEM
4.278%
EE-
INTESA SANPAOLO
3.501%
EE-
FINMECCANICA
3.501%
EE-
BANCA MPS
3.112%
EE-
CAMPARI
3.112%
EE-
LUXOTTICA GROUP
3.112%
EE-
SNAM RETE CAS
3.112%
EE-
TELECOM ITALIA
3.112%
EE-
YOOX
3.112%
EE-
A2A
2.723%
E+
PIRELLI & C.
1.556%
E+
ANSALDO STS
1.167%
E+
CNH INDUSTRIAL
1.167%
E+
FIAT
1.167%
E+
MEDIOBANCA
1.167%
E+
TENARIS
1.167%
E+
TOD'S
1.167%
E+
WORLD DUTY FREE
1.167%
E
BUZZY UNICEM
0.389%
E
ATLANTIA
0.194%
E
AUTOGRILL
0.194%
E
EXOR
0.194%
E
S. FERRAGAMO
0.194%
E
TERNA
0.194%
E-
GTEC
0.0780%
E-
MEDIASET
0.0780%
E-
MEDIOLANUM
0.0780%
SUSTAINABILITY:
Yoox has promoted the initiative of YOOXIGEN, winning the Green e-Retailer of the Year Award at the eCommerce Awards for Excellence 2012. The
section “Eco-commerce” on Yoox promotes eco-friendly collections (on the basis of characteristics of the items, such as ethically produced, fair trade, organic,
craft-artisan, custom, recycled, vegan). Many partnership programs have been launched in order to raise awareness about both eco-sustainability and ethical
conduct of fashion.
11.02.2014
37
Yoox Group
Minerva Capital
YOOXYGEN program also aims at promoting good environmental practices among employees in their every-day worklife, with a manual of conduct that
helps people to behave responsibly concentrating on five main areas (paper, water, energy, waste, mobility). The impact of mobility has been taken in such
consideration that Yoox has developed programs of car-sharing for employees and manages to minimize travel introducing tele-information services
(videoconferences, web meetings).; the company owns only hybrid vehicles.
11.02.2014
38
Yoox Group
Minerva Capital
Disclosures:
Ownership and material conflicts of interest: The author(s), or a member of their household, of this report does not hold a financial interest in the
securities of this company. The author(s), or a member of their household, of this report does not know of the existence of any conflicts of interest
that might bias the content or publication of this report.
Receipt of compensation:
Compensation of the author(s) of this report is not based on investment banking revenue.
Position as a officer or director:
The author(s), or a member of their household, does serves as an officer, director or advisory board member of the subject company.
Market making:
The author(s) does act as a market maker in the subject company’s securities.
Disclaimer: The information set forth herein has been obtained or derived from sources generally available to the public and believed by the
author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness.
The information is not intended to be used as the basis of any investment decisions by any person or entity. This information does not constitute
investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a
recommendation by any individual affiliated with Minerva Capital, CFA Institute or the CFA Institute Research Challenge with regard to this company’s
stock.
11.02.2014
39

Yoox Group - CFA Society Italy

Transcription

Similar documents

Farfetch.com Case Study

The last Visconti

Florentia Village

YOOX Bil Sost 12 ENG 04

Now here`s a honey. Big mouthful of shapely

7357268 Nufloors Dec 31.indd

PDF - Enetel Solutions

Experience luxury redefined at the Fairmont Kea Lani, Maui

The Program

P15/S1546/FUL - 1 Coopers Close, Littleworth