Shares for Farfetch Ltd. are jumping nearly 30% to $9.67 in Friday morning trading following the firm’s third-quarter earnings report.
The luxury fashion marketplace announced an adjusted loss per share of 18 cents, compared with last year’s 15-cent loss. However, Wall Street had predicted a loss of 25 cents. Revenues shot up 90% year over year to $255.48 million, as Farfetch confirmed that it expects to break even in 2021.
In a conference call with analysts, founder, co-chair and CEO Jose Neves said the firm logged about 1.9 million active customers by the end of September. The report noted that the value of merchandise sold on the website reached $492 million — a 59% gain from the prior year period.
“These results also demonstrate growth that is multiple times faster than our nearest competitor. I am confident that this strategy will continue to deliver on both top line growth, strong market share capture, healthy unit economics and as a result, places us on a steady path to profitability,” Neves said. “And I believe this will be the case independently of how long the promotional environment will last.”
A recent sticking point for analysts has been Farfetch’s acquisition of New Guards Group. In August, shares for the platform plummeted close to 50% on the announcement that it had snapped up the streetwear-centered firm — which holds exclusive licenses for buzzy labels including Off-White, Palm Angels and Heron Preston — for $675 million.
Investors had expressed worries over high acquisition costs and spending on its tech infrastructure; however, Neves described the New Guards purchase as the latest addition to a portfolio of what the company calls “brands of the future.” By skewing more direct-to-consumer, the Farfetch chief said he expects higher organic traffic and stronger brand adjacency — a strategy that experts say have proven to work for luxury platforms.
In the third-quarter call, the Farfetch shared that New Guards’ roster of brands “sold more on Farfetch in Q3 than any other single brand” — specifically calling out the performance of Virgil Abloh’s Off-White, which Neves said became the site’s No. 1 most-searched luxury brand, ahead of more established heritage brands on the website. (Farfetch’s marketplace includes labels such as Burberry, Gucci, Prada and Saint Laurent.)
“This demonstrates on one side the incredible compatibility of the two businesses from a consumer perspective, but also the extraordinary capability that New Guards Group has of bringing the most sought-after labels to market labels that were practically nonexistent just six years ago,” Neves added.
Farfetch expects a fourth-quarter loss between $21 million and $31 million.
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