Farfetch announces robust sales and GMV growth but profits decline

Second quarter revenues at Farfetch Limited increased by 62.6 million dollars to 209.3 million dollars in second quarter 2019, representing growth of 42.7 percent. The company said, this increase was primarily driven by 52.8 percent growth in platform services revenue to 176.5 million dollars, while in-store revenue increased by 33.1 percent to 4.2 million dollars. Farfetch’s gross merchandise value (GMV) increased by 149.9 million dollars to 488.5 million dollars, representing year-over-year growth of 44.3 percent but loss after tax increased by 71.9 million dollars or 406.9 percent to 89.6 million dollars. Farfetch has also announced the acquisition of Milan-based New Guards Group, a collection of brands and a luxury fashion brand platform.

Commenting on the trading update, José Neves, Farfetch Founder, CEO and Co-Chair said in a statement: “Farfetch continued to deliver market-leading growth in second quarter 2019, with Platform GMV expanding 44 percent to a record 484 million dollars or approximately 49 percent growth on a constant currency basis. With our acquisition of New Guards Group, we are uniquely positioned to empower creators, curators and consumers and help uphold the values of an industry we love.”

Review of Farfetch’s second quarter results

Farfetch added that platform GMV increased by 148.9 million dollars to 484.3 million dollars, representing growth of 44.4 percent. The increases in GMV and platform GMV were primarily driven by an increase of 55.7 percent in active consumers to 1.8 million, and increases in average number of orders per active consumer and total number of orders on the Farfetch Marketplace. Other contributing factors included an increase in the number of clients supported by Farfetch Platform Solutions, growth in transactions through managed websites and the addition of Stadium Goods, sneaker and streetwear marketplace.

The company further said that in second quarter, platform fulfillment revenue increased 1.8 percent, a slower rate as compared to the growth of platform GMV, primarily due to a significant increase in customer promotions year-over-year.

Adjusted EBITDA loss increased by 12.2 million dollars or 47.8 percent to 37.6 million dollars, while adjusted EBITDA margin improved from negative 21.4 percent to negative 20.8 percent over the same period. Loss after tax increased by 71.9 million dollars or 406.9 percent to 89.6 million dollars driven by a year-over-year increase in the operating loss from 36.8 million dollars to 95.8 million dollars partially offset by a decrease in unrealized foreign exchange losses on revaluation of non-United States Dollar denominated receivables and payables.

Farfetch announces changes to executive team structure

Farfetch further said that after the acquisition of New Guards Group and its continued strong growth in its existing and emerging markets, it is taking the opportunity to evolve the Farfetch executive team structure to be even better positioned to execute on its strategy going forward. As part of this initiative, Farfetch will bring responsibility for its brand, customers and consumer product under a new role – Chief Customer Officer, which will be filled by Stephanie Phair, Farfetch’s current Chief Strategy Officer. The board has designated her as an executive officer of the company for purposes of Rule 3b-7 under the Securities Exchange Act of 1934.

The company said, with over 15 years of experience in online luxury, Phair is a veteran in the technology and fashion industry. She started her online career in 2005 at Portero, a marketplace for pre-owned luxury in New York, and was a member of the executive board at Net-a-Porter Group for seven years during which time she launched and built their second business, The Outnet. Phair also has experience on the agency side of the business, in-house at Issey Miyake, as well as in communications and marketing at American Vogue. She also sits on the board of Moncler S.pA, and was appointed as Chairman of the British Fashion Council in May 2018.

Farfetch also announced that Andrew Robb is stepping down as chief operating officer after serving in the position for nine years.

“Andrew has worked passionately alongside me over the past nine years and I am grateful for all he has done to help establish our market-defining position,” said Neves.

Farfetch reveals expectations for Q3 and full year

The company expects platform GMV growth of 30 percent to 35 percent and adjusted EBITDA loss margin of approximately negative 18 percent to negative 20 percent of adjusted revenue for the third quarter of 2019.

For full year 2019, Farfetch expects GMV of approximately 2.10 billion dollars, representing approximately 50 percent year-over-year growth, platform GMV of 1.91 to 1.95 billion dollars, representing approximately 37-40 percent year-over-year growth, adjusted EBITDA loss of 135 to 145 million dollars, representing adjusted EBITDA loss margin of approximately 15 percent to 17 percent of adjusted revenue.

Picture: Farfetch website