Farfetch posts strong Q1 growth and targets profitability by end FY21
Farfetch, the global online luxury fashion platform, said it had achieved growth in General Merchandise Value in Q1 2020 of between 43% and 46%. While it remains loss-making, it said it was still targeting profitability at EBITDA level by the end of financial year 2021.
The London-based and New York-listed group said Q1 adjusted EBITDA would be between $(21) million to $(25) million, which was ahead of guidance. Estimated Q1 2020 loss after tax (including non-cash items) would be between $(70) million to $(125) million, it said.
Farfetch has, however, suspended its full-year guidance for 2020 in light of the COVID-19 crisis. Despite the crisis, China had been a bright spot for Farfetch with growth in the region in the latter two months of Q1 2020 faster than full year 2019.
Of late the company said it had witnessed a slow-down in demand in Europe and North America, along with higher promotional activity from some competitors, but it remained focused on delivering against its financial objectives and supporting its staff, suppliers and brand & retail partners, many of whom are small businesses.
Farfetch launched the #SupportBusiness initiative to help its small boutique partners weather the crisis by helping them to promote their ranges and make more online sales while their stores remained closed.
CEO Jose Neves said he believed the COVID-19 crisis would accelerate the move to digital retail and that the company would be well placed to take advantage of that when the markets began to recover.
”Digital transactions are expected to represent a significantly larger proportion of the overall industry. With current retail store closures, travel restrictions, and shifting consumer preference and shopping habits, I expect to see an acceleration of this secular shift to online.
"This should also spur further online adoption by brands and retailers of our platform, which provides the industry with the broadest reach of luxury customers and full control of the direct to consumer offering. We believe our preliminary first quarter 2020 results reflect the strength of our business model in a changing environment," Neves said.
He added that the company had not witnessed any material disruption to its supply chain during the crisis and that its diversified model would stand it in good stead.
"Today our Marketplace connects customers in over 190 countries with items from more than 50 countries and over 1,200 of the world’s best brands, boutiques and department stores, delivering a truly unique shopping experience and access to the most extensive selection of luxury on a single platform. Our logistics platform enables these sellers to transact with our 2.1 million Active Consumers located across 190 countries.
"As a result of our highly distributed and resilient model, and our continuous coordination with our global logistics partners, we have not seen any material impact to our operations or supply chain since the initial outbreak of COVID-19. This has allowed us to serve customers well," Neves added.
Neves write a detailed letter to its shareholder outlining how COVID-19 was affecting the business and how it was responding. it can be read in full here.