Farfetch shares plummet as cost of ambitious investment is revealed

By

Sandra Halliday

Published
Dec 2, 2022

Farfetch shares are more than a quarter down from where they were this time last week with the luxury e-tailer’s stock price hitting $5.70. That’s an all-time low and well down on the $70+ they traded at early last year. And the reason? The company held a capital markets day on Thursday and the cost of its ambitious plans didn’t seem to please its investors.

Its growth-focused link-ups with big names such as Richemont will cost it around $170 million and with the stock market often having a ‘profit now’ mentality, it’s no surprise that the shares fell.

But there was also good news in the presentation with expectations of a return to sales growth next year following a Q3 sales decline. Meanwhile, gross merchandise value (GMV) could rise 22% to almost $5 billion by the end of next year and it could double by 2025, despite expectations of a drop close to 7% this year.

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Around $500 million in GMV for 2023 will come as it works with other businesses. For instance, it’s buying an almost-half stake in Richemont’s Yoox Net-A-Porter and is also working with retailers and brands to power their signature webstores, including Bergdorf Goodman, Harrods, Thom Browne and Ferragamo.

Harrods’ CIO Andreas Efstathiou said that “Farfetch has been a strong partner. We selected [it] due to their Software as a Service Platform whilst allowing us the capabilities to enhance our front end with FPS, moving away from a complex in-house stack of multiple vendors and has made economic sense to Harrods. Their experience in Luxury and willingness to mature their platform for multicategory has been essential in our partnership”.

Farfetch also quoted the example of French brand Ami that uses its Platform Solutions offer. It said the label saw a 58% compound annual growth rate in revenue, 44% of revenue from non-European markets, up from 27% when the partnership started, and increased shipping from 25 to 190 locations.

As well as absorbing YNAP, the Richemont link-up will also see that firm’s brands using the Farfetch marketplace. That will boost the e-tailer’s brands offer and particularly its presence in hard luxury, which chief marketplace officer Edward Sabbagh said is a “huge opportunity”. 

The partnership gives it deeper exposure to Richemont’s Cartier, Van Cleef & Arpels and Buccellati brands and jewellery has been a star category for ultra-affluent online shoppers in recent years.

The integration of all of the Richemont brands will take several years but should represent a massive business stream in future and justifies that rapid targeted jump to $10 billion in GMV by 2025.