Yoox Net-a-Porter Targeted by Short Sellers as Competition GrowsBy and
Luxury e-commerce growth attracts LVMH, other players
Yoox Net-a-Porter short interest is highest in Europe luxury
Short sellers are betting against Yoox Net-a-Porter SpA in the increasingly competitive business of selling luxury goods online.
Almost 17 percent of the Milan-listed online retailer’s shares are out on loan, indicating they’ve been borrowed by short sellers betting against the stock, according to data from IHS Markit Ltd. The percentage has tripled in the past year, and is the highest in a Bloomberg Intelligence index of 23 European luxury stocks, the Markit data show.
Short interest is near its high for the year even though Yoox Net-a-Porter’s stock has jumped 16 percent from its mid-March low and the company has reiterated guidance for growth of as much as 20 percent this year. A company spokesman declined to comment on the short interest.
Online luxury sales rose 13 percent in 2016, according to Bain & Co., and the firm forecasts e-commerce will remain the fastest-growing channel for sales of high-end products through 2020. But competition has heated up as web companies Farfetch, Zalando and Amazon.com Inc., brick-and-mortar department stores, and luxury brands’ own sites all vie for a slice of the business. LVMH, the world’s largest luxury company, became the latest entrant last month when it announced 24Sevres.com, a new multi-brand website.
“Pure players like Net-a-Porter and Zalando have been surfing the wave of inertia on the part of traditional retailers for years," said Antoine Parison, analyst at Bryan, Garnier & Co. “Now, on the one hand you have Amazon gaining ground, and on the other you have traditional retailers starting to do their job and build up their capacities online.” He has a neutral rating on Yoox Net-a-Porter and a sell on Zalando.
The Markit data is an estimate of short interest based on the firm’s research into securities lending. Italian market regulator Consob on its website shows a much lower short position of 5.6 percent of total shares in Yoox Net-a-Porter in part because traders only need to disclose short positions to regulators when they exceed 0.5 percent of a company’s share capital. All the short interest data only looks at the company’s ordinary shares, excluding the unlisted B class of shares.
Yoox Net-a-Porter sells designer fashion including $12,000 Gucci coats and $995 Louboutin sneakers at full price on its Net-a-Porter site as well as helping luxury brands unload older stock through the off-price emporium outlet Yoox. The company’s “online flagship” division also operates e-commerce as a white-label service for brands like Valentino and Kering’s Saint Laurent.
While rapid growth in luxury e-commerce will drive revenue at Yoox Net-a-Porter, the rising importance of online sales also could prompt key partners like Kering to withdraw from the company’s white-label service, preferring to handle e-commerce in house.
Yoox Net-a-Porter shares have fallen 7.9 percent this year, compared with an 11 percent increase in the Bloomberg Intelligence European luxury index. The company on May 3 reported first-quarter revenues that beat estimates, up 19 percent on an organic basis.
"In terms of the outlook I would say we are off to a very good start," said Chief Financial Officer Enrico Cavatorta in a call with analysts and investors, confirming the company’s guidance of growing 17 percent to 20 percent a year through 2020.
Analysts have remained bullish, with 15 buy ratings, three holds, and one sell rating on the stock.
In a short sale, an investor sells borrowed shares in the hope buying them back at a lower price to return to the lender, pocketing the difference between the sale price and the repurchase price.