Farfetch Stock Soars As José Neves’ Vision Takes Shape
Even in a world of luxury comeback stories, Farfetch’s pandemic run stands out.
The digital platform closed out 2021 with a profitability milestone — its first annual adjusted earnings before interest, taxes, depreciation and amortization.
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And although Farfetch was just dipping its toe in the profit pool, with adjusted EBITDA of $1.6 million, the top line is growing strongly. And Farfetch’s gross merchandise volume topped $4.2 billion last year, putting the company at twice the size it was in 2019 and shining a spotlight on just how much COVID-19 supercharged luxury’s move to the web.
This year, Farfetch is planning to build on those gains while founder, chairman and chief executive officer José Neves continues to try to build high-fashion bridges — in beauty with Violet Grey; with Reebok; with its platform services business; in advertising; with Alibaba, and through ongoing talks with Johann Rupert’s Compagnie Financière Richemont. (If successful, those talks could see Farfetch powering the digital expansion of Cartier and Richemont’s other maisons and also making a minority investment in the Yoox Net-a-porter e-commerce platform).
On Wall Street — where Neves and the company have a history of being beat up over controversial moves and then applauded when the bets pay off — the bulls took over. Shares of Farfetch shot up 29.2 percent to $19.39 in aftermarket trading on the company’s results.
Neves argued — apparently successfully, for now — that Farfetch has just 2 percent of the $300 billion personal luxury goods business and plenty of space to keep growing as the industry expands to $500 billion by 2025.
And now he’s growing with one of his childhood favorites, having inked a deal with Authentic Brands Group, which is days away from buying Reebok from Adidas. ABG is partnering with Farfetch’s New Guards Group, which will be the brand’s core operating partner across Europe and will also exclusively create and distribute high-end collaboration products for Reebok in more than 50 countries.
“This is a brand, when I was a kid, one of my dreams was to own a Reebok Pump, they were super cool and super expensive,” Neves told WWD on Thursday, referring to the sneaker that could be pumped up to fit snuggly.
Neves said New Guards, which has turned Palm Angels into an elevated streetwear powerhouse in just four years, can do big things with Reebok.
“If you go back to those archives, it’s a treasure trove of cultural icons, one of them after the other,” he said. “With time, it will sink in that this can be a really really pivotal movement for Reebok and the history of streetwear.”
With Reebok, Neves shows, again, his ability to connect and keep connecting with key players in fashion, in this case, Jamie Salter, ABG’s founder, chairman and CEO, and one of the industry’s key dealmakers in recent years.
“We’ve very ambitious and when we saw the Reebok opportunity, I called Jamie and said, ‘Hey, we need to have a chat, because we think we can do a lot of revolutionary things with this brand,’” Neves said. “And the teams absolutely jelled and we think this can be really incredible.”
And it could always lead to more.
“With that deal, I did develop a fantastic relationship with Jamie Salter and I think what they’re doing is incredible and, who knows, maybe it will lead to future collaborations,” he said.
That could lead just about anywhere given ABG’s large portfolio, which includes Airwalk, Barneys New York, Brooks Brothers, Vision Streetwear and many more.
Although, he works in the ultra competitive world of luxury fashion, Neves is preaching the virtue of partnerships in a world with lots of digital growth in luxury.
“For me, it’s really like the cake is expanding so fast that it makes much more sense to have a spirit of partnership than to have a spirit of competition,” he said. “We’re not competing with retailers, we see them as potential partners.”
Courtesy Photo
Farfetch’s fourth-quarter net profits tallied $96.9 million and compared with losses of $2.3 billion a year earlier, when embedded derivative liabilities skewed results. Revenues for the three months ended Dec. 31 rose 23.2 percent to $665.7 million from $540.1 million a year earlier.
For the full year, Farfetch posted net profits of $1.5 billion, up from losses of $3.3 billion in 2020. Revenues for the year increased 34.8 percent to $2.3 billion as gross merchandise volume rose 33 percent.
This year, Farfetch forecast that its digital platform GMV would grow in a range of 28 percent to 32 percent, while its brand platform GMV expands by 20 percent to 25 percent with an adjusted EBITDA margin of 1 percent to 2 percent.
Neves told analysts on a conference call: “We emerge from this pandemic stronger than ever and in Farfetch style, an industry leader with more strategic brand relationships and an unmatched proposition for consumers. Our marketplace business is also healthier than in 2019. Like many luxury groups, we have taken the last two years as an opportunity to shift our business increasingly to full-price sales away from markdown.
“Of the top 10 brands on our marketplace, five now follow a full-price strategy,” he said, adding, “Our own brownsfashion.com has eliminated all markdown sales for over one year and is now 100 percent full-price destination. In 2022, we expect to continue to deliver market share capturing digital platforms, GMV growth while executing on our strategy to continue driving a much larger full price mix toward an even healthier business.”
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