LONDON — Why is Matchesfashion having trouble finding the right match?
The luxury e-tailer, which will next month install Asos’ Nick Beighton as its fourth chief executive officer in five years, is rapidly turning into the Elizabeth Taylor of retail, unable to find the ideal partner or commit for the long, or even medium, term.
Earlier this week Matchesfashion’s private equity owners Apax Partners confirmed the news that Paolo De Cesare, a retail veteran who took over the CEO role last September, and who helped turn the company around during his short tenure, would be leaving to pursue other opportunities.
Beighton, the former CEO of fast-fashion e-commerce giant Asos, will take over in August.
Those who’ve worked with Beighton have described him as “brash, fast-paced, consumer-focused — and a volume guy.”
A tech and finance whiz, he helped take Asos from 178 million pounds in revenues to nearly 4 billion pounds by the time he left the company last October.
But why did Apax pick another tech-focused CEO when it already sent two of them out the door?
The first was Ulric Jerome, the CEO already at the helm of Matchesfashion when the company was sold in 2017.
Jerome is a tech investor and entrepreneur who, before joining Matches, was a founder of Pixmania.com, an e-commerce pioneer in Europe. Jerome and his team had successfully sold Pixmania to Dixons Retail plc when he joined Matches.
The second was Ajay Kavan, a high-flyer at Amazon who had launched businesses such as Amazon Fresh in the European Union and Japan, and built key strategic partnerships, including with Morrisons supermarkets in the U.K.
He joined shortly before the pandemic struck and left after a year.
Earlier this week, Tom Hall, partner at Apax and member of the board at Matchesfashion, said the retailer was in a “fortunate position” to be able to attract a CEO of Beighton’s caliber.
“Nick is a proven operator with phenomenal knowledge of online retail,” said Hall.
Yet it was less than a year ago that Hall said he was delighted to welcome De Cesare, noting that the Italian manager’s long and varied experience as a senior executive around the globe made him “ideally suited for the role.”
Clearly, that wasn’t the case.
Apax declined to comment further on the CEO changes, and its wider strategy for Matchesfashion going forward.
During his nine months in the role, De Cesare turned double-digit sales declines into strong double-digit mid-teens growth; put the focus back on full-price sales, and jumpstarted its series of live, immersive events for customers around international cultural moments such as Frieze.
Matchesfashion’s accounts were in a parlous state when De Cesare arrived last September due to the impact of the pandemic on demand and supply chain, and to trade friction with Europe following Brexit.
While other e-tailers like Mytheresa and, on a larger scale, Amazon soared during the lockdowns, Matchesfashion was hit particularly hard. As reported, for the year ended Jan. 31, 2021, the company saw a 9 percent decline in revenues to 392.1 million pounds. Losses widened to 36.6 million pounds from 5.9 million pounds.
During his tenure De Cesare, who’d most recently been CEO of Printemps, put an end to what he called the “discounting game”; he also put a larger focus on creativity and the “British-ness” of the offer, and the reemergence of categories that had been dormant during the pandemic such as occasion-wear and holiday clothing.
Shortly after De Cesare arrived, full-price revenues in the fourth quarter of 2021 were up 25 percent compared with 2020, and 41 percent versus 2019. In the U.S., full-price sales were particularly robust, rising 40 percent in the three months to Dec. 31. Overall growth in the U.S. has been in the high double-digits versus 2020.
Industry sources speculated that those changes didn’t come thick or fast enough for Apax, which purchased Matchesfashion in September 2017 at a reported valuation of $1 billion after a bidding frenzy by a number of private equity investors, including Permira and KKR.
Since then, Apax is reported to have pumped multimillions into the retailer as it eyes an exit in the next few years. Private equity firms usually publicly list or sell companies between four and seven years after purchase.
The clock is ticking: Sources have said that Apax needs to restore the business to profitability, and to much higher growth levels, and believes Beighton is the person to do it.
Apax hasn’t said so, but it’s likely that Beighton will add a marketplace to Matchesfashion, attracting more brands and revenue, without all the risks of a traditional retailer.
A marketplace is the online model du jour adopted by companies ranging from Asos, Next and Marks & Spencer to Net-a-porter and Saks. Farfetch was born as a fashion marketplace.
Whether or not the choice of Beighton works out, the CEO revolving door is revealing on a number of levels.
“I am very surprised to see Paolo go, as he has steered Matches on a solid relaunch course. I guess this is just the ‘nth’ demonstration — look at the Farfetch share price collapse, or the travails of YNAP — that selling luxury online through a multibrand business concept is very difficult,” said Luca Solca of Bernstein.
Online businesses need regular infusions of investment to update their technology; speed delivery services; deal with the flood of returns; diversify their offers, and stage immersive experiences for the all-important VIP customers.
Post-pandemic, they’ve also been suffering from ongoing supply chain woes and renewed competition from physical retailers, which have been reopening.
These investment-intensive companies also take time to turn a profit.
For years, the financial community has been hammering Compagnie Financière Richemont about the drag that its Yoox Net-a-porter division has been on the bottom line. It has been urging Richemont to spin off the division, which it has fully controlled since 2015.
For the fiscal year ended March 31, YNAP’s EBITDA finally reached breakeven before the exceptional reward payments to group employees, and the “negative contribution” from Feng Mao, YNAP’s Chinese joint venture with Alibaba.
In addition, Richemont is working on merging YNAP with Farfetch. Richemont confirmed last November it was in late-stage discussions with Farfetch about creating an open and shared platform with YNAP to sell fashion, luxury and high-end jewelry.
If it comes to be, the site will have a broad shareholder base and no majority owner. It will leverage the tech firepower of Farfetch and see brands including Cartier and Van Cleef & Arpels — in addition to myriad fashion names — join a new iteration of the Farfetch marketplace.
Farfetch, meanwhile, has been shouldering its own burdens: The high-end fashion marketplace has seen its share price plummet more than 75 percent in the past six months, and is currently trading at $6.95.
Farfetch has often been tough for investors to understand, particularly as so many on Wall Street are making trades with short-term investment horizons.
By contrast, José Neves, the platform’s CEO, chairman and founder, is looking to the long term, expanding into new categories and businesses, investing in competitors and trying to stitch together an operating system for fashion in the digital age.
Matchesfashion isn’t only operating against this challenging backdrop, it also has a growing image problem to face.
Financial analysts, headhunters and investors polled by WWD say Apax’s game of CEO musical chairs makes the retailer look silly and indecisive, tarnishing its image and, potentially, its relationship with the high-end brands it sells.
“They have no clue what they’re doing,” said one analyst, who noted that competitors such as Mytheresa and Ssense are thriving.
“The question for Apax is ‘What is the endgame with Matches?’ If they can’t answer that, they’ll risk losing their credibility and scaring brands away,” the analyst said.
An executive search expert said they were surprised that De Cesare left so suddenly, and the big question now is, “What does Apax want Matches to be?”
“It’s going to be very interesting to watch how all this unfolds from a consumer perspective given there is such little brand overlap between Asos and Matches, and this is a business built on relationships,” the person said, adding: “Does Nick have those relationships?”
One investor said they could see things from the perspective of Apax. “Hiring people is hard, and its error-prone. Apax hasn’t got the CEO right yet, and they need to make it right.”
