Yoox Fashions a Digital Boom in Luxury; Investors With an Eye on Luxury Web Sales Can Look Past Burberry to the Yoox Site
September 17, 2013 Leave a comment
September 16, 2013, 3:38 p.m. ET
Yoox Fashions a Digital Boom in Luxury
Investors With an Eye on Luxury Web Sales Can Look Past Burberry to the Yoox Site
When models walked the runway in London on Monday showcasing Burberry‘sBRBY.LN -0.44% new women’s collection, few outside of the fashion elite and some rock stars got invited. But for the next two weeks, looks unveiled at the show will be available exclusively to another group: visitors to Burberry’s website. Investors with an eye for this trend, though, may want to consider looking beyond the usual brand names.Luxury is one of the last segments of retail to embrace Internet sales, but Burberry stuck its neck out early and is reaping the rewards. Sanford C. Bernstein’s Mario Ortelli estimates that online sales account directly for a few percentage points of the company’s total revenue. But that rises to more than 10% when including customers who research online before shopping in person.
Other luxury companies look keen to catch up. Prada, for instance, had just €1.9 million ($2.5 million) in e-commerce sales in the year through January 2011—the last time it broke out figures. That was tiny in the scheme of total net sales that exceeded €2 billion, and the company says the opportunity is significant.
One way investors can benefit from a pickup in online luxury sales is through shares of Milan-listed Yoox YOOX.MI +0.58% .
It operates multibrand websites as well as single-brand ones on behalf of some of luxury’s biggest labels, including Valentino, Jil Sander, and Ermenegildo Zegna. Yoox also runs a site in cooperation with Harper’s Bazaar, where readers can buy fashions seen on the magazine’s pages.
Yoox’s appeal for luxury brands is that it immediately helps them reach shoppers in more than 100 countries. It doesn’t make sense having physical stores in many of those locations or even handling the logistics of delivering there—and Yoox has the scale and infrastructure to do it already.
Analysts expect Yoox’s revenue to rise 25% this year, and demand should ensure it doesn’t slow down much for the next few years. A good comparison is Amazon.com, which got into the game early and established a leading position in high-growth categories like books and electronics.
Some investors may fear they have missed the boat, given Yoox trades at 2.5 times next year’s consensus sales. But as investors in Amazon know, negative bets in this sector based on multiples alone can go out of style fast.
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