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.
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.