Farfetch, the luxury fashion e-tail giant, has released its Q1 results, indicating progress towards profitability despite facing several obstacles. The company experienced negative currency exchange effects and a challenging market environment but still managed to show revenue growth. In Q1, revenue increased by 8% to $556.4 million compared to the previous year, although it would have been higher with stable exchange rates. Gross Merchandise Value (GMV) saw minimal growth at 0.1% to $931.7 million but would have been higher without currency fluctuations.
The Digital Platform GMV declined by 1% but increased by 2% at constant currency rates to $799.7 million. This decline was influenced by factors such as more markdown sales, currency exchange issues, and a shift in customer demand towards lower-priced items. However, there was an increase in the number of items per order. The Marketplace average order value (AOV) decreased from $632 to $566. These results were impacted by ongoing challenges in the Russian and Chinese markets due to trade suspensions and Covid restrictions.
Despite these challenges, Farfetch experienced growth in other markets. Brand Platform GMV rose by 10%, or 15% at constant currency rates, to $109.7 million. In-store GMV also increased by 3.8% to $22.3 million. The growth in Brand Platform GMV was driven by the opening of New Guards brands’ stores and like-for-like growth from existing stores.
Although the gross profit margin decreased to 43.2% and the company reported an adjusted EBITDA loss of almost $35 million, Farfetch’s revenue surpassed analysts’ expectations, and losses were narrower than predicted. Consequently, the company’s shares saw a double-digit jump in late trading.
José Neves, Farfetch’s founder, chairman, and CEO, expressed his satisfaction with the Q1 results, stating that they align with the company’s 2023 execution plan. Neves emphasized the sequential improvement in GMV growth in the US and China, as well as the strength and resilience of the core business.
CFO Elliot Jordan also expressed contentment with the numbers, highlighting the company’s disciplined cost control, improved cash flows, and successful navigation through macro challenges. Jordan reiterated Farfetch’s commitment to achieving luxury market-beating growth, profitability, and positive free cash flow.
During Q1, Farfetch implemented various growth initiatives, including increasing supply from multi-brand retailers and e-concession partners, launching Ferragamo’s European e-commerce channel, expanding the relationship with Harrods, and employing digital and AI capabilities to enhance personalization and engagement on the Farfetch Marketplace. These efforts resulted in an increase in active customers to approximately 4 million.
Looking ahead, Farfetch anticipates a full-year group GMV of approximately $4.9 billion, Digital Platform GMV of about $4.2 billion, Brand Platform GMV of $0.6 billion, and an adjusted EBITDA margin of 1% to 3%. Despite facing some challenges, Farfetch remains optimistic about its future growth and profitability.
Useful links:
1. Farfetch Q1 Financial Results
2. Farfetch Shares Surge Following Q1 Results
