Far­fetch Lays Out Big Am­bi­tions

Ceo José Neves said the web could ac­count for more than a quar­ter of the lux­ury mar­ket in a decade.

WWD Digital Daily - - News - BY EVAN CLARK

José Neves is sur­rounded by big num­bers — and they’re get­ting even big­ger.

The founder, chair­man and chief ex­ec­u­tive of­fi­cer of Far­fetch took his com­pany pub­lic in Septem­ber, valu­ing his per­sonal stake at more than $950 mil­lion. The lux­ury plat­form now has $1 bil­lion in cash on hand. And the firm’s third-quar­ter rev­enues ex­pand by 52 per­cent while the num­ber of ac­tive con­sumers in­creased 42 per­cent to 1.2 mil­lion from a year ear­lier. Clearly, that’s not enough.

Neves told an­a­lysts on a con­fer­ence call that the $300 bil­lion global lux­ury mar­ket would grow to $500 bil­lion in the next decade and that on­line sales would make up “at least 25 per­cent of that, maybe 30 per­cent.”

The on­line lux­ury mar­ket rep­re­sents an “in­cre­men­tal op­por­tu­nity of $100 bil­lion in new busi­ness,” he said. “We be­lieve Far­fetch is well po­si­tioned to take the lion’s share of that to­tal ad­dress­able mar­ket.”

He said the com­pany’s busi­ness model was de­signed to be self-re­in­forc­ing as brands come on the plat­form and at­tract more cus­tomers, which in­creases sales and in turn draws more sell­ers.

“This is a pow­er­ful fly wheel,” Neves said, re­fer­ring to on­line lux­ury as a “win­ner takes most in the long run.”

Clearly Neves sees Far­fetch as that win­ner — a point he un­der­scored sev­eral times on the call.

The firm’s third-quar­ter re­port, its first as a pub­lic com­pany, showed just how swiftly it is grow­ing into that vi­sion. Rev­enues rose to $132.2 mil­lion from $86.9 mil­lion.

With topline growth like that, Wall

Street is gen­er­ally will­ing to wait for the bot­tom line to catch up, which it still needs to do. Losses ex­panded to $77.3 mil­lion from $28.2 mil­lion as sell­ing, gen­eral and ad­min­is­tra­tive ex­penses nearly dou­bled to $144.2 mil­lion, par­tic­u­larly in the area of share-based pay­ments.

The gross mer­chan­dise value of the goods sold through the plat­form for the quar­ter rose 53 per­cent, to $310 mil­lion, which Neves said was about twice the rate of the on­line lux­ury mar­ket.

Far­fetch has drawn the in­ter­est of in­vestors, in­clud­ing the likes of Ker­ing and Chanel, by sit­ting at the lu­cra­tive point be­tween brand and fi­nal con­sumer. And it’s do­ing ev­ery­thing to stay there. The busi­ness high­lights for the quar­ter in­cluded:

• The ad­di­tion of Moschino, Vic­to­ria

Beck­ham and Tory Burch and a larger bou­tique net­work with new part­ners from Rus­sia and Es­to­nia.

• The launch of Har­vey Ni­chols as the

plat­form’s first depart­ment store part­ner.

• A part­ner­ship with Dover Street Mar­ket, which is known for its ex­per­tise in fine jew­elry.

Far­fetch’s growth has not been ab­so­lute. As the num­ber of or­ders in­creased 54.9 per­cent, to 662.5 mil­lion in the third quar­ter, the third-quar­ter aver­age or­der value slipped to $584.60 from $605.20 a year ear­lier.

For the fourth quar­ter, Far­fetch boosted its pro­jected gross mer­chan­dise value to a range of $435 mil­lion to $445 mil­lion, higher than pre­vi­ous es­ti­mates.

Neves said Far­fetch with the IPO closed chap­ter one of its story and is now mov­ing on to a very am­bi­tious chap­ter two.

Far­fetch ceo José Neves and board mem­ber Na­talie Massenet at the New York Stock Ex­change dur­ing Far­fetch’s IPO.

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