Farfetch, a prominent player in the luxury fashion retail sector, could still be evaluating a sale of its subsidiary, Browns, after its recent deal with South Korean Coupang.
Farfetch’s acquisition of Browns from the Burstein family in 2015 marked a significant, forward move by the company toward integrating digital and physical retail experiences. In 2021, Farfetch leveraged the 53-year-old department store to showcase its “store of the future” concept, integrating connected mirrors and app-based functionality. London-based Browns is credited with bringing designers like Missoni, Alaïa and Calvin Klein to U.K. shores. In 2022, it reportedly did over $34.5 million in e-commerce revenue and a modest amount of sales via its store in London.
On December 20, Farfetch — which went public in 2018 — announced that, effective immediately, it would transition to being a private entity, led by founder and CEO José Neves. But starting on April 30, Farfetch will become a Coupang subsidiary. If it doesn’t comply with the terms of the deal, Farfetch must repay the loan of $500 million from Coupang at an annual interest rate of 12.5%. The terms of the agreement did not include any mention of what would happen to Browns.
A sale of the company would improve Farfetch’s liquidity as it grapples with challenges including mounting debts. As of December, Farfetch had a market value of $258.4 million. The company declined to comment for this article.
Frasers Group is a potential buyer. The company, led by retail entrepreneur Mike Ashley, is known for owning sports retailer Sports Direct and department store House of Fraser. Since 2021, Frasers Group has been expanding its U.K. fashion retail footprint, including with Flannels super-boutiques. An acquisition of Browns would help its reported goal to bolster its luxury fashion segment. In December, Frasers reported confidence in achieving an adjusted pre-tax profit of £500 million-£550 million ($628 million-$690 million) in the 12 months ending April 2024, up from £478 million in the prior year.
However, on December 20, Frasers Group purchased 37-year-old luxury multi-brand retailer Matches. Prior to the acquisition, Matches had been losing money for years, with a reported loss of $43 million in 2023.
For the brands sold at Browns, a sale could signal fewer product orders. “Consolidation is not a great thing, mainly because there are so many barriers to entry [at multi-band retailers] for small independent brands right now,” said Erin Mullaney-Page, luxury fashion consultant and previous buyer at Browns. “If Fraser’s does end up owning all the independent boutiques in England, which is pretty much where it’s going, how does that give a small independent brand any opportunity? Since the brand mix is the same everywhere, buyers are lazy and going for safe bets, leading to the same 10 brands everywhere.” Frasers was unable to comment ahead of this story’s publication.
However, owning two luxury retailers could be good for Frasers. Browns would fulfill Frasers Group’s broader “elevation strategy” of acquiring fashion companies and building stakes in the fashion industry to solidify its status in the luxury fashion domain. Its current portfolio companies like House of Fraser lack the luxury cachet that comes with more luxury offerings. For its part, House of Fraser specializes in more mass brands like Jack Wills and AllSaints.
“Without this essential raw-edge mix of independent and big brands, you dilute the essence of what made Browns great in the first place,” said Holly Wood, founder of the Future Fashion Summit. “The [single] Browns store, in London’s Mayfair on Brook Street, boasts high-tech private shopping suites, which are loved by fashion icons and music stars like Dua Lipa. But the sell-off could be an opportunity for Browns to revive its independent spirit without the added stress of the struggling juggernaut that Farfetch has become.”
Browns is not the same retailer it was when Farfetch acquired it in 2015. Browns has been a key asset for Farfetch, aimed at bolstering its position in the luxury market and advancing Browns’ digital presence. Sources said that, as a result, the company doesn’t have as much value as before.
“The reality is that when Farfetch acquired brands like the New Guards Group, they integrated them as part of its flywheel and utilized Browns to help fuel overall value for the group,” said a former employee at Farfetch speaking off the record. “That happened in two main ways. One was using the open-to-buy (OTB) Browns to buy inventory to not just sell on Browns, but also to sell on Farfetch — both for a higher margin than other retailers, because it was essentially bought inventory. Farfetch also used Browns in particular to showcase its B2B tech opportunities.”
Open-to-buy is the calculated difference between the planned inventory at the start of a sales period and the anticipated ending inventory, which includes planned sales and markdowns. By updating its inventory strategy when it moved to the OTB model under Farfetch in 2015, Browns lost out on its strong individual focus.
But since early 2023, Browns has been trying to go back to its roots, according to previous Farfetch employees. Browns did not respond to interview requests. Farfetch appointed fashion veteran Elizabeth von der Goltz as CEO and chief fashion and merchandising officer of Browns in January last year. Von der Goltz was most recently CCO at Matches Fashion, a role she held from March 2021 to September 2022. Prior to that, she was global buying director at Yoox Net-a-Porter, and she also spent 17 years as an svp and gmm at Bergdorf Goodman. Von der Goltz has previously said that she understands that Browns is about “heritage” and “curation”. Since January 2022, Browns has started selling Gauge81, Aya Muse and Paula Canovas del Vas.
At Net-a-Porter, Von der Goltz led The Vanguard, a global mentorship initiative that supports up-and-coming brands and features them on the retailer’s site. Now, she manages a comparable project at Browns, known as Browns Focus.
But cracks are starting to show at Browns. Following the early 2023 executive shifts, staff members at Browns have been leaving after long tenures. Sarah Johnson, the company’s head of brand marketing and communications, left the company on December 28, and Ida Petersson, director of men’s and womenswear buying, left on December 7. Both had worked for Browns for six years. Petersson left to pursue another opportunity she received in October, and Johnson was not available to comment.
“Ida has a great eye and was very supportive of young, up-and-coming brands,” said Mullaney-Page. “There are very few people in the industry like her left. The industry is becoming extremely corporate and numbers-driven.”
The questions around Browns’ future tie to the direction of the luxury marketplace. “The Farfetch model was a huge cash investment, with a hope for future margin and profitability,” said the former Farfetch employee. “And that hasn’t worked. What you’re seeing is the rise of smaller, more focused niche marketplaces with a close eye on unit economics and margin. So they may go slower, and they may have smaller market shares, but they will be built with a more sustainable profit pathway.”
