Farfetch Looks to Bolster Cash Flow With $300 Million Offering as Quest Toward Profitability Continues

Farfetch Ltd. is looking to raise some cash.

The luxury e-commerce company today announced that it is offering $300 million in convertible senior notes, which mature in 2027, through a private placement.

Amid the coronavirus crisis, Farfetch has temporarily shuttered its Los Angeles studios as well as its few brick-and-mortar outposts. The e-tailer said in an April 16 release that it had “not seen any material impact” on supply chain and other operations in the initial stages of the outbreak. 

For the first quarter of 2020, the company expects to deliver a gross merchandise value of $105 million. (This figure applies only to the brand platform.) Further, it expects to see strong digital platform GMV growth for Q1, driven by advances in China, where it has seen rapid year on year growth since Feb. 1.

But, despite these developments, Farfetch has yet to become profitable. For the 2019 fiscal year, the e-commerce site recorded a loss of $373.69 million after taxes, it reported in December 2019. For Q1 of 2020, it expects to see post-tax losses in the range of $70 million to $125 million. With so much uncertainty regarding how the pandemic will progress, the e-tailer has decided to suspend its full-year guidance for 2020. It expects its financial outlook to be back on track in 2021.

While the coronavirus crisis has hit retail hard, Farfetch CEO José Neves remains upbeat about his company’s position moving forward.

“When a consumer sees a product on Farfetch, 85% of the time the product is available from multiple sellers, to be shipped from different locations, often from different countries,” Neves wrote in an April 16 letter to shareholders.  “This makes our model more durable than physical retail in the current situation, but it also means we are well prepared to operate in this environment, in contrast to other luxury e-tailers, who are typically reliant on a small number of distribution centers.”

Overall, analysts forecast the luxury sector will see a 20% dip for the first quarter of 2020, with store closures throughout North America and Europe likely to cause further declines during the second quarter. While the luxury market had been doing well prior to the pandemic, department store chains in the space have been challenged by digital disruption and declining foot traffic, factors that led to the downfall of Barneys New York in 2019. Faced with these pressures as well as a hefty $4 billion debt load, Neiman Marcus Group, which operates stores across its namesake banner as well as Last Call and Bergdorf Goodman signs, is expected to file for bankruptcy within the coming weeks.

 Editor’s Note: This story was updated to reflect that Farfetch’s projected $105 million in GMV applies only to the brand platform.

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