Mytheresa Seeks To Attract Brands With New Platform Model (NYSE:MYTE)

A Quick Take On MYT Netherlands

MYT Netherlands (MYTE) went public in January 2021, raising $407 million in gross proceeds in a U.S. IPO that priced at $26.00 per share.

The firm operates the ecommerce website Mytheresa, selling luxury fashion items to consumers.

Looking ahead, management sees the pandemic as having accelerated a shift to online spending for luxury items, although the rate of growth in online luxury spending will moderate going forward.

The company is adding a new platform model as an alternative for new luxury brands, but time will tell if it pays off for the firm.

My near-term outlook for MYTE is a Hold due to uncertainties with online luxury spending growth and its new platform execution.

Company

Munich, Germany-based Mytheresa was founded to develop a curated selection of luxury fashion brands that it carries on its ecommerce website.

Management is headed by Chief Executive Officer Michael Kliger, who has been with the firm since 2015 and was previously VP International at eBay Enterprise and an Executive Director at Accenture.

Below is a brief overview video of Mytheresa Men:

(Source)

Mytheresa also operates offline events in major cities. The firm provides personal shopping support for top customers.

In January 2019, the company launched Mytheresa Kids and in January 2020 it launched Mytheresa Men with over 100 curated brands.

The firm primarily markets its online website to high income luxury consumers via online search engine optimization, advertising and word of mouth.

Market & Competition

According to a 2020 market research report by Bain & Company Luxury Goods Worldwide Market Study (Spring Update), the global market for luxury goods fell by an estimated 25% in Q1 2020 which could develop into a full year contraction of 20% to 25%.

The report said ‘there will be a recovery for the luxury market but the industry will be profoundly transformed…The coronavirus crisis will force the industry to think more creatively and innovate even faster to meet a host of new consumer demands and channel constraints.’

Notably for MYTE, online luxury has proven resilient versus retail oriented merchants.

Also, the report estimates that ‘recovery to 2019 levels will not occur until 2022 or 2023,’ with growth resuming only gradually and depending on the major ‘luxury player’s strategic responses to the current crisis and their ability to transform the industry on behalf of the customer.’

Major competitive or other industry participants include:

• Online multi-brand retailers and marketplaces

• Farfetch (FTCH)

• Luxury brands selling direct to consumers

• Luxury multi-brand stores

MYTE’s Recent Financial Performance

(Source data for above GAAP financial charts)

In the past 12 months, MYTE’s stock price has fallen 49.7 percent vs. the U.S. S&P 500 index’s rise of 15.3 percent, as the chart below indicates:

(Source)

Valuation Metrics For MYTE

Below is a table of relevant capitalization and valuation figures for the company:

Measure	Amount
Market Capitalization	$1,290,000,000
Enterprise Value	$1,240,000,000
Price / Sales	1.65
Enterprise Value / Sales	1.67
Enterprise Value / EBITDA	-87.18
Free Cash Flow [TTM]	$65,250,000
Revenue Growth Rate [TTM]	35.00%
Earnings Per Share	-$0.65

(Source)

As a reference, a relevant public comparable would be Farfetch Limited; shown below is a comparison of their primary valuation metrics:

Metric	Farfetch (FTCH)	MYT Netherlands (MYTE)	Variance
Price / Sales	3.55	1.65	-53.5%
Enterprise Value / Sales	3.52	1.67	-52.6%
Enterprise Value / EBITDA	-11.70	-87.18	645.1%
Free Cash Flow [TTM]	-$66,770,000	$65,250,000	-197.7%
Revenue Growth Rate	40.6%	35.0%	-13.7%

(Source)

Commentary On MYTE

In its last earnings call, covering FQ1 2022’s results, management highlighted growth in its gross merchandise value, at 29.7% year-over-year, which above its long-term guidance range of 22% – 25%.

Also, CEO Kliger said that its focus on the ‘big spending wardrobe building customer segment’ provides the company with the best customer base for its curated, multi-brand approach.

Notably, the company launched a resale service for its best customers, enabling them to earn store credit through the service which has resulted in higher average order values in their follow-on purchases.

MYTE is shifting part of its operating model for selected brands to a curated platform model, or CPM, from the existing wholesale model.

The firm hopes the CPM model will attract brands seeking an alternative to the traditional wholesale approach.

As to its financial results, management said its customer engagement and retention grew as active customers increased by over 35% in the trailing twelve months

As a result of its partial shift to a CPM model, net sales for fiscal year 2022 is expected to result in a 14% to 18% growth rate of FY 2021.

On the cost side, shipping and payment costs increased due to growing total orders shipped and likely some inflation costs.

Marketing expenses dropped as a percentage of GMV, but should rise as the firm will likely spend more on events and PR activities as the pandemic runs its course.

Looking ahead, management sees the pandemic as having accelerated a shift to online spending for luxury items, although the rate of growth in online luxury spending will moderate going forward.

The primary risks to the company’s outlook are the slowing growth rate of luxury online spending and managing the partial transition of its brand supplier base to its new curated platform model.

Given those risks over the near-term, my outlook on MYTE is a Hold until it can prove its new CPM platform brings in new brands on a cost effective basis.