Farfetch, Now Matches: Investors Look for Deals Amid Luxury eCommerce Sites

Matchesfashion has officially changed hands.

Frasers Group, the British retail conglomerate, has acquired the luxury multibrand retailer for £52 million ($65 million) from private equity firm Apax Partners. Apax had purchased Matches in 2017 from its founders, Tom and Ruth Chapman, in a deal valued at $1 billion.

This transaction unfolds amid the dramatic twists and turns of the online luxury retail arena. Just this week, Farfetch, a competitor of Matches, narrowly avoided bankruptcy with a rescue by South Korean retail giant Coupang. Coupang acquired Farfetch, previously valued at over $500 million.

With the acquisition deal in place, Farfetch receives a $500 million injection to support its operations, while Coupang gains increased access to the personal luxury goods sector in South Korea. This market is renowned for having the highest per capita spending on such items globally.

“Farfetch is a landmark of the luxury landscape and has been a transformative force in demonstrating that online luxury is the future of luxury retail,” said Coupang founder and CEO Bom Kim in a Monday (Dec. 18) statement. “Farfetch will rededicate itself to providing the most elevated experience for the world’s most exclusive brands while pursuing steady and thoughtful growth as a private company.”

Read more: Can Coupang’s $500 Million Lifeline Save Farfetch From Falling Out of Fashion?

Matchesfashion Acquisition

The brand, facing substantial losses over the past three years, saw its losses explode from £5.9 million in 2020 to £36.6 million in 2021, spiraling even further to £39.8 million in 2022. Blaming luxury brands downsizing their wholesale presence and a shift to concessions at the end of 2021, Matches found itself in need of a makeover.

Enter Apax. For more than a year, Apax has reportedly been engaged in efforts to revitalize the business. In August 2022, the firm named Nick Beighton, the former CEO of Asos, as the chief executive, making him the fourth CEO for Matches in six years. Beighton was brought on board to spearhead the company’s turnaround, leveraging his expertise in digital retail and facilitating expansion in the United States. Shortly thereafter, Carl Tallents, the former head of luxury brands at Frasers, joined Matches as the chief commercial officer.

January 2023 marked a bold investment move, with Apax injecting £60 million into Matches — its most significant investment in the company since the acquisition. The investment, a blend of £40 million in equity and £20 million in additional debt, coincided with Matches engaging in negotiations with lenders for extensions and contract waivers. During this period, Matches flaunted its holiday sales strength, indicating the onset of its recovery.

Frasers disclosed in today’s announcement that Matches’s gross assets stood at around £170 million as of January.

The Current Consumer

According to PYMNTS Intelligence, 85% of consumers feel their incomes don’t keep up with inflation. Recent September data shows 62% are concerned about the economy, with an additional 35% expressing some worry, while only 2.9% remain unconcerned. Respondents in the PYMNTS survey expect a return to pre-COVID inflation levels by late 2024.

In the realm of big spenders, described as the VIP shoppers of the economy in a recent PYMNTS report, credit cards have been instrumental in navigating the inflationary landscape. However, affluent consumers accustomed to relying heavily on their credit cards for significant daily expenses now find themselves confronted with the need to explore alternative payment methods for essential goods and services.

As detailed in the collaborative report “Credit Card Use During Economic Turbulence” by PYMNTS and Elan Financial Services, over the past six months, one-third of cardholders increased their share of credit card expenses, with only 15% reducing their spending. The rise in costs has unsurprisingly played a role in driving this trend of heightened card usage.

That said, most consumers are prioritizing value. If the product is costly and fails to deliver the desired value, they will likely pass on it.

Read more: Should Brands and Retailers Go All-In With High Spenders?

Frasers Group’s Sweet Spot?

Frasers Group has consistently pursued acquisitions over the years, frequently targeting distressed retailers and brands. Its portfolio includes Amara, House of Fraser, Evans Cycles, Flannels, Jack Wills and Sports Direct. The company also maintains stakes in Asos, Boohoo, Currys, Hugo Boss, Mulberry and N Brown. However, their recent attempt to acquire the German sporting goods retailer Sportscheck hit a snag, as the company filed for insolvency in late November.

Can Frasers Group sprinkle its retail magic and give Matchesfashion what it needs to stand out in luxury eCommerce? And how will Farfetch make out with guidance from Coupang? Only time and the discerning shopper will tell.