Farfetch revenue soars, losses remain but growth impresses
today Nov 9, 2018
Now that Farfetch is a listed company, we’ll be getting more regular updates on its financial progress and the first of those came this week as the company reported its third-quarter results. What did they show? Revenue growth is continuing to easily outpace the market even if making a profit remains some way off.
We'll look at the detailed figures in a minute, but it's worth taking in some of the percentages first. The company said that its gross merchandise value (GMV) growth was 53% in the quarter. GMV aside (as that includes revenue that goes to its partner brands and retailers as well as its own coffers), Farfetch’s own Q3 revenue grew 52% and its ‘platform services revenue’ was up 61%. Meanwhile its active customer numbers rose a very healthy 42% and the number of orders was up 55%.
That clearly paints a picture of a business that’s in demand by consumers and that's increasingly attractive to retailers and brands too. In fact, it expanded its brand and boutique relationships in the quarter and its Marketplace now offers luxury products from over 1,000 vendors across 48 countries.
And we can't ignore its recent giant IPO, which left it “well capitalised with $1 billion in cash and cash equivalents” at the end of the quarter.
The company expects the luxury fashion industry to see online sales growing by as much as $100 billion over the next 10 years and it wants to be at the forefront of this growth.
The three months up to September 30 helped it on that journey and José Neves, Farfetch Founder, CEO and co-Chairman, talked up the firm’s “outsized growth” in the period.
He said the platform’s GMV was “growing at approximately twice the rate of the online luxury market in the third quarter… as we continued to leverage our unique positioning to be the category leader for the luxury industry.”
So let's look at the figures. GMV grew from $204.6 million to $309.9 million year-on-year, Platform GMV rose to $305.8 million from $200.2 million and revenue rose from $86.9 million to $132.1 million.
But the company remained loss-making. Its adjusted EBITDA was -$32.3 million, wider than the -$20.6 million of a year ago, although the adjusted EBITDA margin remained the same at 29.3%. The net loss surged to $77.2 million from just $28.1 million this time last year.
CFO Elliot Jordan was “delighted” with all of this and said that the “growth, coupled with attractive unit economics and improving operating efficiencies allows us to make further investments to continue to capture market share into the future.”
And there's no denying that, losses aside, the company appears to have a powerful future – the investors who flocked to it in droves during its recent IPO clearly believe that.
The company said that in Q3 the Farfetch Marketplace continued to increase its share in the online personal luxury market, and all three geographic regions – Americas, EMEA and APAC – posted their best ever quarter in terms of GMV.
It also signed new brands, including Moschino, Victoria Beckham, and Tory Burch, and widened its boutique network to now include partners in Russia and Estonia. And it launched Britain’s Harvey Nichols, as the first department store partner on the Marketplace, as well as partnering with Dover Street Market.
The company also boosted its technology with a new visual search function; launched Roberto Cavalli and Neil Barrett on its white label platform; and agreed to acquire CuriosityChina, a digital tech company that will provide a suite of services to help brands expand in China via web, app, WeChat Stores and Mini Programs.
So we know what the long-term aims are, but what does this all mean for the immediate future? In Q4, the all-important Christmas season quarter, Platform GMV is expected to be within the range of $435 million and $445 million, which is higher than the company’s previous estimates.
And in that respect, Farfetch has much in common with other pureplay online retailers further down the price scale, such as Asos and Boohoo, with the kind of revenue expectations that physical store retailers can only envy. A big difference here, of course, is that the company’s unique operating model also adds revenue to the physical stores with which it partners rather than diverting it away.
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