Farfetch, the leading luxury fashion e-commerce platform, faced a steep decline in its share price, despite reporting impressive revenue growth and achieving profitability in the third quarter. The company’s stock plummeted by 22% during after-hours trading following the release of its Q3 results, which failed to meet market expectations. While Farfetch recorded a net profit of $769 million for the quarter, compared to a loss of $537 million the previous year, it is important to note that this figure included a one-time non-cash benefit of $901 million. Additionally, although revenue increased by 33% to $583 million, analysts anticipated a higher revenue of around $591 million and were concerned about the decline in gross profit margin due to increased costs.
Despite the market’s reaction, Farfetch remains optimistic about its overall performance. Upon closer examination of the financial figures, it becomes evident that the company has been steadily capturing a larger share of the luxury fashion market. In the three months ending in September, the gross merchandise value (GMV) rose by 28% to $1.017 billion compared to the previous year, more than doubling the figure from two years ago. Furthermore, gross profit reached $252 million, up from $209 million, although the gross profit margin experienced a slight decrease from 47.8% to 43.3%. In addition to the previously mentioned net profit, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) amounted to $5.3 million, a significant improvement from the $10.3 million loss recorded the previous year. The company’s digital platform GMV increased from $674 million to $828 million, with gross profit rising from $143 million to $159 million. The average order value on the marketplace also witnessed a surge, rising from $574 to $593, while the number of active customers experienced a notable increase.
Farfetch’s digital platform GMV growth on a two-year basis displayed a significant improvement, accelerating from 89% in Q2 2021 to 97% in Q3 2021. This growth was primarily driven by key luxury markets such as the United States, Mainland China, the United Kingdom, the Middle East, Germany, and Russia, which more than doubled within two years. The company’s partnerships with renowned brands, including Prada, Balenciaga, Miu Miu, Dolce & Gabbana, and Moncler, have consistently contributed to its success. Initiatives like “The Language of Prada” and collaborative efforts with these brands have resonated well with customers.
Farfetch’s Brand Platform also witnessed substantial growth, with GMV and revenue increasing from $112 million to $165 million and gross profit rising from $58 million to $80 million. The company’s New Guards Group collection, featuring brands like Off-White and Palm Angels, has proven to be highly successful, with both brands ranking among the top 10 on the Farfetch Marketplace.
José Neves, Farfetch’s Founder, Chairman, and CEO, expressed his optimism regarding the company’s future. He highlighted Farfetch’s ability to secure a significant share of the market and expressed confidence in achieving their goal of full-year Adjusted EBITDA profitability and GMV growth surpassing their long-term 30% CAGR (compound annual growth rate) target. Neves also emphasized the positive response from the industry regarding Farfetch’s platform strategy, as more luxury brands and retailers are listing their products on the platform, resulting in record-breaking media solutions revenue. He believes that the company’s Luxury New Retail vision and Farfetch Platform Solutions have the potential to revolutionize the digital luxury experience and unlock significant growth opportunities in the future.
Useful links:
– [Farfetch investor relations website](https://farfetchinvestors.gcs-web.com/)
– [Farfetch website](https://www.farfetch.com/)
