Farfetch, the leading luxury fashion online marketplace, has released its Q3 results, revealing a dip in gross merchandise value (GMV) due to currency effects and challenges in Russia and China. Despite this decline, the company remains optimistic about its performance.
For the period ending September, the GMV was down 4.9% year on year at $967.4 million. However, on a currency-neutral basis, it actually increased by 4.2%. The digital platform GMV fell by 5% to $787.4 million, but rose by 2.6% at stable exchange rates. The brand platform GMV experienced a larger decline of 10.4% to $148.1 million, but would have been 4.9% higher on a currency-neutral basis.
However, there was a silver lining as overall revenue managed to rise by a slim 1.9% to $593.4 million. If exchange rates had remained the same as the previous year, the company would have reported a 14.1% increase. The challenges in Russia and mainland China due to Covid-19 restrictions impacted the performance of the digital platform GMV. The decrease in average order value (AOV) from $593 to $530 was mainly attributed to the translation impact of the strengthening US dollar, as well as a decline in average selling price, which was partially offset by an increase in the number of items per order.
Despite the GMV dips and losses, Farfetch saw improvements in both gross profit margin and order contribution margin. The gross profit margin increased to 44.9%, a growth of 160 basis points, and the digital platform order contribution margin rose to 32.4%, an increase of 580 basis points. However, the company did report an adjusted EBITDA loss of $4.1 million, compared to a profit of $5.3 million in the previous year, primarily due to higher growth in general and administrative expenses. The net loss for the quarter was $274.9 million, compared to a profit of $769.1 million in the same period last year.
Despite the challenges, Farfetch’s CFO, Elliot Jordan, expressed confidence in the company’s ability to navigate the current macro environment and return to profitable growth in 2023. He highlighted the positive growth in constant-currency GMV and revenue, as well as significant improvements in gross margin and order contribution margin. Jordan also emphasized the financial benefits from the company’s initiatives to rationalize its cost base.
During the quarter, Farfetch continued to collaborate with brands on Farfetch Marketplace campaigns, promoting collections from Acne Studios, Marc Jacobs, and Stolen Girlfriends Club. The company also expanded its Fashion Concierge services and launched Fashion Concierge On Demand, offering private clients assistance in sourcing unique luxury items. Farfetch’s New Guards Group focused on its direct-to-consumer channels and created culturally relevant collections.
Notably, Farfetch witnessed a significant increase in in-store GMV, which rose by 35.3% to $31.9 million during the quarter. This surge was driven by additional store openings of New Guards brands in the last 12 months and strong like-for-like growth from key existing stores.
Looking ahead, Farfetch predicts a decline of 5% to 7% in digital platform GMV for the full year, while brand platform GMV is expected to remain broadly flat. Despite the challenges faced, the company remains well positioned to execute its long-term vision and return to profitable growth in the future.
Useful links:
1. Farfetch Website
2. Farfetch Q3 Results Article
