We’ve had a few “luxury retail” e-commerce companies come public including FarFetch (FTCH), TheRealReal (REAL) and most recently Poshmark (POSH). Although the latter feels a little more like an “eBay for clothing” than a real luxury retailer.
Mytheresa is positioned at the very high end of this market in terms of both the products they carry and the customers they serve. Most of us are not the target customer. For example they are:
- Enjoy exclusivity and special access to new pieces and collections.
- Need just “a piece” by a specific designer but “the piece.”
- Expect to have “in season” items.
- Are price insensitive.
In other words these customers are “easily pleased by the very best.” In terms of numbers these customers on the order of $50,000/year on clothes, shoes, bags and other personal and experiential items.
The roots of the company go back to a single boutique in Munich in 1997. This is important as the company has carried the boutique approach into the online world effectively.
Boutique customers crave curation, unique products, and individual attention and client service. It’s the opposite of other retail models that emphasize vast selection, low prices, and will even suffer through self-checkout as part of the bargain.
Mytheresa starts with a unique selection of items from top designers. In some cases they are collections specially developed just for them and in other cases part of special launch events where Mytheresa is in effect making on a marketing role for the brand in exchange for special access.
Large brands have embraced building exclusivity with local collaborations, joint ventures and “capsule collections.” Collaboration is the new trend in consumer brands from fashion to music. Mytheresa did 37 of these in FY2020 with brands including GUCCI, Valentino, Alexander McQUEEN and PRADA.
Luxury arrived fashionably late to the online commerce party but is catching up. From $33B and 12% in 2019 it’s expected to reach $105B or more in 2025 and account for 30%+ of total sales.
It’s a growth market that is very resilient because the wealthy are able to spend in environments good and bad. As in the Diner for many of us high fashion represents one of those “things going on that we don’t know about.”
Customer dynamics are very positive. Most customers stick around and make repeat purchases. This while customer acquisition costs are declining. The cohort analysis shown is probably the most impressive I’ve seen in the online commerce world. It stands in stark contrast to low-end companies like Wish (WISH) where hardly any customers continue to make purchases after their first foray.
Long-term growth rests on some clear strategies. New customers will continue to be acquired while additional categories in Mensware and Kidsware. The company also expects to deepen their existing brand partnerships and broaden their offering with new ones.
Management has run the company in an investor-friendly fashion – focused on operating efficiency and generating positive operating margin even at their existing size. At a ~$500M run rate they are operating close to their target model.
In round numbers the company is targeting a continuation of ~25% top-line growth and 8% AJEBITDA margins.
The closest comp here is Farfetch (FTCH) which is larger and growing faster but with substantial losses. FTCH is trading with a $21B market cap on $1.5B of TTM revenue. If we were to given them a “normalized” operating margin of 8% you’d have trailing earnings of $120M. Valuation-wise FTCH is at 14x trailing sales and 175x trailing normalized earnings.
Post-IPO there will be 90.2M shares outstanding and the shares are expected to price above the recently increased price range. They filed at $16-18 and increased it to $24-26. Assuming a $28 offer that gets us to a market cap of $2.5B before the shares start trading tomorrow.
Current FY revenues should be in the $675-$700M range for the current FY. That’s a 3.7x revenue multiple and 46x AJEBITDA multiple.
With even TheRealReal trading at 7.8x revenue it’s hard to see how the market doesn’t bestow a 100% pop on shares of MYTE tomorrow.