A tale of two promising UK companies...
The business news that matters
A scheduling note: There will be no Off to Lunch tomorrow, back on Monday
Hello and welcome to the latest edition of Off to Lunch…
Two promising UK companies are in the headlines for different reasons. Castore, the sportswear brand, has raised £145 million of new funding that values the company at around £950 million. Secondly, shares in Farfetch fell by half yesterday after the London-based online retailer, which sells luxury goods, cancelled the publication of its latest financial results and said that “any prior forecasts or guidance should no longer be relied upon”.
Castore was founded in 2016 in Liverpool by Tom and Phil Beahon, who are brothers and pictured above. The company has secured a string of sponsorship deals to provide kits for individual athletes and teams, including Sir Andy Murray, Newcastle United, the Red Bull Racing Formula 1 team and the England cricket team.
The new funding round has been led by Raine Partners, the US bank, as well as Hanaco Ventures and Felix Capital, the venture capital firms.
In an interview with the Financial Times, Tom Beahon said:
“We’ve now got 50, give or take, team partners around the world. We’ve proven that we can help them grow their merchandise revenues. We offer those guys something that Nike, Adidas, Puma are not able to. We genuinely can take that next step and try and become a truly global brand.”
Beahon was asked why Castore had chosen to raise money privately rather than looking to list on the stock market. In reply, he said:
“The private capital markets have clearly evolved significantly in the last decade, which gives entrepreneurs and founders a genuine alternative to the public markets.”
You can find that FT interview here
The brothers initially funded Castore through loans and funds from their parents remortgaging their house in the north-west of England. This included a £20,000 start-up loan from Virgin. You can find out more about how the brothers founded and scaled-up Castore through a Q&A on the Virgin website here, which is full of interesting nuggets. We will have more on Castore soon…
Farfetch was founded by Portuguese entrepreneur Jose Neves in 2007 in east London, where it is still based. The company runs its own luxury fashion website and licenses its technology to other premium brands to sell their products online. Richemont, the Swiss luxury goods company, is a key backer of Farfetch. The two companies had agreed a deal that involved Richemont taking shares in Farfetch in return for Farfetch taking a 47.5 per cent stake in Yoox Net-a-Porter, which also sells luxury fashion online. However, that transaction is yet to be completed.
Farfetch floated in New York in 2018 and has a rollercoaster ride. Its share price peaked in early 2021, valuing the company at more than $20 billion (£15.8 billion). However, since then its shares have fallen sharply amid a wider market sell-off of technology companies. Farfetch is now valued at less than $350 million. The company’s share price graph is below…
Farfetch had been due to publish its latest results yesterday but instead issued the following statement late on Tuesday:
Farfetch Limited (NYSE: FTCH), the leading global platform for the luxury fashion industry, will not announce its third quarter 2023 financial results and will not hold its related conference call previously scheduled for Wednesday, November 29, 2023. The company expects to provide a market update in due course.
The Company will not be providing any forecasts or guidance at this time, and any prior forecasts or guidance should no longer be relied upon
The backdrop to this statement is a report by The Telegraph that Neves is working on a deal to take the company private due to the difficulties it has faced on public markets. Neves is working on the deal with JP Morgan, the story said, which you can read here
Richemont has issued its own statement on the situation - and it doesn’t sound happy. The company said:
“Following the recent media reports on and announcement made by Farfetch on 28 November 2023, Richemont would like to remind its shareholders that it has no financial obligations towards Farfetch and notes that it does not envisage lending or investing into Farfetch.
“Richemont is carefully monitoring the situation, including reviewing its options in respect of its arrangements with Farfetch announced on 24 August 2022, which remain subject to certain terms and outstanding conditions. Neither Richemont Maisons nor Yoox Net-A-Porter have currently adopted Farfetch Platform Solutions and they continue to operate on their own platforms.
“Richemont will make a further announcement if and when appropriate.”
The future looks uncertain for Farfetch right now and there is likely to be more developments in this story soon…
Other stories that matter…
1. There is plenty of interesting news around this week about the future of retail. For instance, the owners of Eldon Square shopping centre in Newcastle have revealed plans to convert empty space into leisure and sports venues, such as crazy golf and go-karting for families. You can read more on that in a story by the Chronicle here. However, Ikea and Lego, two of the biggest consumer brands in the world, are betting that physical shops still have a bright future. The Scandinavian giants are opening a collection of new shop formats, according to a piece by the Financial Times here. Meanwhile, Chris Dawson, the founder of The Range, the discount chain, is planning to open three new Wilko shops before Christmas after buying the failed brand. More here
2. Unemployment in the UK may be much lower than previously thought - 3.5 per cent rather than 4.2 per cent - according to experimental data released by the Office for National Statistics. Financial Times story here. However, Andrew Bailey, governor of the Bank of England, has defended his downbeat assessment of the outlook for the UK economy. “I’ve been written up this week as being an ultra-pessimist but I don’t see it that way. I see it as a realist view,” he told the Daily Focus, a Staffordshire-based business publication. You can read that interview with Bailey here
3. THG founder Matt Moulding has bought a 3.2 per cent stake in Kelso Group, an investment group that has been critical of his company. Has the hunted become the hunter? More here
4. Elon Musk gave a remarkable interview at The New York Times DealBook Summit yesterday. This included a message for companies that have stopped advertising with Twitter: “Go f*ck yourself”…
5. Zurich and Singapore are the most expensive cities in the world to live in, according to The Economist’s latest annual survey. You can find that report here
Podcast…
A reminder that the latest episode of our Business Leader podcast looks at the story of how Metro became the most-read daily newspaper in the UK after launching in 1999. We speak to Deborah Arthurs, the editor-in-chief, and Richard Thomson, the managing director, about how Metro disrupted a highly competitive industry and how it has had to battle against a string of big challenges, some of which posed an existential threat to the business.
You can listen to the episode on Substack here, Spotify here and Apple here
And finally…
I have just finished Michael Lewis’s new book Going Infinite, which is about Sam Bankman-Fried, the founder of FTX. Bankman-Fried, of course, is now awaiting sentencing after being found guilty of fraud. The book is not Lewis’s best, but it is a riveting read about an extraordinary character.
The book was released on the eve of Bankman-Fried’s trial and you read it differently knowingly that he was found guilty of fraud. Lewis has been criticised for being too sympathetic towards Bankman-Fried. The book certainly does not paint the FTX founder as someone who deliberately set-out to defraud people, but it does cover his moral ambiguity, slapdash leadership style and arrogance. You are left with the impression of someone who could easily have overseen a business that spiralled out of control and acted with no controls. That, ultimately, is probably a more realistic portrayal of corporate fraud, and is the one that was heard in the courtroom during Bankman-Fried’s trial.
Interestingly, Lewis has given an interview to Puck in which he says that the book has got a better reception in the UK than the US. He said:
“The Brits definitely get it. The tone of the reception there was just like they were reading it as a ‘read.’
“I’ve never had better material. The material is unbelievable. And it was. But it had to pass through this American moral filter.”
You can read that interview here (you need to sign-up for a trial to read it). The book itself is here
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Best
Graham