Sneakers once were for playing sports, but now they’re fashion items. And that’s led luxury e-commerce powerhouse Farfetch Ltd. to invest $250 million to acquire Stadium Goods, an online marketplace seller of limited-edition sneakers.
The move, announced today, will help Farfetch expand beyond traditional luxury goods into an edgier selection of so-called streetwear that appeals to affluent, younger consumers. For Stadium Goods, which is based in New York City, the deal represents an opportunity to reach the global audience of Farfetch, which is based in the United Kingdom and sells items from more than 1,000 boutiques in 48 countries to luxury buyers in 190 nations.
Executives from both companies emphasized the opportunity to sell Stadium Goods’ wares to a global audience.
José Neves, founder, CEO and co-chairman, Farfetch
“I am confident that we can help Stadium Goods grow its international presence for sneakerheads around the world through our expertise in technology, logistics and data,” José Neves, founder, CEO and co-chairman of Farfetch, said in a prepared statement that accompanied the announcement of the deal.
“By leveraging Farfetch’s best-in-class cross-border logistics and technology, as well as their luxury prowess, scale and customer base, we will be in a prime position to capitalize on the massive international demand for sneakers and streetwear,” Stadium Goods co-founder and co-CEO John McPheters added.
McPheters and Jed Stiller founded Stadium Goods in 2015. The retailer, which sells new and previously owned but never worn shoes, sells online at StadiumGoods.com, through a shop in New York City and on online marketplaces operated by Farfetch, China’s Alibaba Group, Amazon.com Inc., eBay Inc. and others.
Stadium Goods has raised $5.6 million from investors, according to Crunchbase. Among its minority investors is global luxury conglomerate LVMH Moët Hennessey Louis Vuitton, which has also invested in Lyst, a luxury fashion site that directs shoppers to the websites of high-end apparel retailers to make purchases. LVMH is No. 51 in the Internet Retailer Europe 500 rankings of the region’s top online retailers.
Flush with cash
Farfetch—the leading luxury e-commerce marketplace in the world, according to Internet Retailer’s 2018 Online Luxury Report—says consumers around the world in 2017 bought $70 billion worth of the kind of premium sportswear Stadium Goods sells, citing data from consulting firm Bain & Co. Farfetch notes that this market “is largely incremental to Farfetch’s existing addressable market,” meaning that it moves the company into selling goods that, for the most part, it doesn’t currently offer.
Farfetch has been growing rapidly, fueled by the $885 million it raised in a September 2018 initial public offering on the New York Stock Exchange. The company also got a $397 million capital infusion in 2017 from Chinese e-commerce giant JD.com, No. 1 in the Internet Retailer Asia 500, which took a 14% stake in Farfetch, according to the prospectus Farfetch issued ahead of its IPO. Farfetch previously had raised $304.5 million, according to Crunchbase.
Farfetch reported rapid growth in its third quarter 2018 earnings release. The company said the value of goods sold on its marketplace grew 53% in the quarter ended Sept. 30 compared with the prior-year period, and that it had sold $1.25 billion worth of goods in the previous 12 months. Revenue grew 53% to $86.9 million, but its loss for the quarter increased to $77.3 million versus $28.2 million during the same period last year.
Farfetch, as part of the Q3 release, also announced it was raising its estimate for fourth quarter gross merchandise value—the value of goods sold on its marketplace—to a range of $435 million to $445 million. That would represent growth of 40-43% over its $310.7 million in GMV in the fourth quarter of 2017.
The online marketplace had a stock market value of just under $7 billion as of mid-day trading today. Farfetch shares were up nearly 3% today, ahead of the less than 1% increase in U.S. stock market values, suggesting investor approval of the Stadium Goods acquisition.
Farfetch is paying $250 million in cash and stock for Stadium Goods, and the deal is expected to be finalized in the first quarter of 2019. Goldman Sachs acted as financial advisor to Farfetch for the Stadium Goods transaction and Fenwick & West as legal advisor.
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