YNAP in line with 5-year plan, core profit margins to rise in 2018: CEO

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MILAN (Reuters) – Yoox Net-A-Porter (YNAP) (YNAP.MI) is in line with its five-year plan and core profit margins will rise 30-70 basis points in 2018, as revenue is lifted by sales through mobiles and in the Middle East, the group’s chief executive said on Tuesday.

“(The results) in 2017 and the outlook for 2018 put us on track to meet our five-year plan target and we expect an improvement in adjusted core profit margin between 30-70 basis points this year,” CEO Federico Marchetti told Reuters in an interview ahead of the group’s full-year results.

The online retailer, which runs four different websites as well as online flagship stores for famous fashion brands such as Armani, Moncler (MONC.MI) and Valentino, has set a goal of increasing revenue annually by 17-20 percent at constant exchange rates in the years to 2020.

While confirming its five-year plan targets, YNAP Chief Financial Officer Enrico Cavatorta said adjusted core profit margins would sit at the lower end of the 11-13 percent guidance the group provided in 2016.

The group said in a statement that full-year adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were 169.2 million euros last year, in line with a Thomson Reuters estimate, with an EBITDA margin of 8.1 percent.

Marchetti said the group sees a lot of growth coming from mobile sales, “a key pillar of our strategy”, with mobile apps, as the fastest growing channel in sales through mobile phones.

“We are investing more money in upgrading and redesigning our apps and we will continue with growth (in mobile sales) month after month,” Marchetti added.

In January, the group said that in 2017, for the first year, sales by customers shopping with their phones were just above 50 percent of sales. The group has 3.1 million active clients.

Just over half of customers buying luxury clothes and accessories online use their mobile for their internet shopping, according to a recent survey by Boston Consulting Group. That percentage grows to 75 percent for younger customers and 77 percent for those in China, the survey said.

YNAP also said it would consolidate its position in the hard luxury sector – made up of jewelery and watches – as the group increasingly counts on its high-spending client base.

Given the slower than expected transfer of products between different warehouses for its “The Out net” business last year, the group decided to postpone by a couple of months the migration of the “Net-a-Porter” platform by a couple of months to 2019.

The delay led to the group reporting a 16.9 percent organic growth for its 2017 sales, just below the group’s yearly goal.

“The migration was a complex process and we learned a lot from our mistakes,” Marchetti told analysts in a post-results call, adding that it was common sense not to carry it out during a holiday season.