Farfetch Announces Second Quarter 2022 Results
- Q2 2022 Gross Merchandise Value (“GMV”) increases 1.3% year-over-year (or increases 7.6% year-over-year at constant currency) to $1 billion
- Q2 2022 Digital Platform GMV decreases 3.3% year-over-year (or increases 1.6% year-over-year at constant currency) to $883.1 million
- Q2 2022 Brand Platform GMV growth of 47.3% year-over-year (or 68.4% year-over-year at constant currency) to $107.1 million
- Q2 2022 Revenue increases 10.7% year-over-year (or increases 20.7% year-over-year at constant currency) to $579.3 million
- Q2 2022 Gross Profit Margin of 46.2% and Digital Platform Order Contribution Margin of 31.7%
- Q2 2022 Profit after Tax of $67.7 million (includes non-cash benefit arising from impact of lower share price on items held at fair value and remeasurements)
- Q2 2022 Adjusted EBITDA of $(24.2) million
- Cash, Cash Equivalents, and Short-term Investments of $675.2 million as of June 30, 2022
LONDON–(BUSINESS WIRE)–Farfetch Limited (NYSE: FTCH), the leading global platform for the luxury fashion industry, today reported financial results for the second quarter ended June 30, 2022.
José Neves, Farfetch Founder, Chairman and CEO, said: “At Farfetch our mission is to be THE Global Platform for Luxury. This week we celebrated a major step towards that mission, with a transformational deal advancing our Luxury New Retail (LNR) partnership with Richemont.
“Since the acquisition of Browns, through the launch of F90 with Gucci, partnerships with Chanel and Harrods, our China JV with Alibaba, Richemont and Kering, and more recent signings of Neiman Marcus and Salvatore Ferragamo, to name just some of the milestones, we have built upon this vision relentlessly – year after year – and this week we celebrate a landmark partnership where we are partnering with Richemont to deliver LNR to their entire group, with their Maisons and YNAP adopting Farfetch Platform Solutions and also joining the Marketplace. This is our long-term vision coming to life.
“And while our eyes are fixed on our North Star, our feet remain planted firmly on the ground. We are navigating a volatile macro environment adeptly, continuing to post growth compounding on what has been a tremendous 3-year run for Farfetch, a period that saw our business double as measured by our GMV. This makes me extremely bullish for 2023, a year when we will lap our closure of our Russia operations, expect China to turn into a tailwind, and will start to see the fruits of large deals signed this year with Reebok, Neiman Marcus Group and Salvatore Ferragamo. These 2023 vectors of growth, combined with the rationalisation of costs we are implementing this year, make me very confident about our 2023 top line, profitability and cash generation.
“I look forward to discussing all of this as well as our longer term plans in an upcoming Capital Markets Day, which we expect to take place before the end of the year.”
Elliot Jordan, CFO of Farfetch, said: “In second quarter 2022 Farfetch demonstrated our ability to navigate macro challenges while delivering robust underlying growth and managing resources effectively. We achieved revenue growth, on a constant currency basis, of 21% year-on-year, and expanded gross profit margins with strong unit profitability. We remain focused on continuing to navigate the near-term macro environment, and I am excited about the multiple levers of growth and drivers of profitability in 2023 and beyond.”
Consolidated Financial Summary and Key Operating Metrics (in $ thousands, except per share data, Average Order Value, Active Consumers or as otherwise stated):
|
|
|
Three months ended June 30, |
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|||||
|
|
|
2021 |
|
|
2022 |
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||
|
Consolidated Group: |
|
|
|
|
|
|
||
|
Gross Merchandise Value (“GMV”) |
|
$ |
1,007,811 |
|
|
$ |
1,020,448 |
|
|
Revenue |
|
|
523,313 |
|
|
|
579,347 |
|
|
Adjusted Revenue (1) |
|
|
439,488 |
|
|
|
499,416 |
|
|
Gross profit |
|
|
230,082 |
|
|
|
267,670 |
|
|
Gross profit margin |
|
44.0% |
|
|
|
46.2 |
% |
|
|
Profit after tax |
|
$ |
87,925 |
|
|
$ |
67,670 |
|
|
Adjusted EBITDA (1) |
|
|
(20,579 |
) |
|
|
(24,224 |
) |
|
Adjusted EBITDA Margin (1) |
|
(4.7)% |
|
|
|
(4.9 |
)% |
|
|
Basic Earnings per share (“EPS”) |
|
$ |
0.24 |
|
|
$ |
0.18 |
|
|
Diluted EPS |
|
|
(0.31 |
) |
|
|
(0.50 |
) |
|
Adjusted EPS (1) |
|
|
(0.17 |
) |
|
|
(0.21 |
) |
|
Digital Platform: |
|
|
|
|
|
|
||
|
Digital Platform GMV |
|
$ |
913,350 |
|
|
$ |
883,130 |
|
|
Digital Platform Services Revenue |
|
|
349,131 |
|
|
|
356,038 |
|
|
Digital Platform Gross Profit |
|
|
184,999 |
|
|
|
187,784 |
|
|
Digital Platform Gross Profit Margin |
|
53.0% |
|
|
|
52.7 |
% |
|
|
Digital Platform Order Contribution (1) |
|
$ |
119,111 |
|
|
$ |
112,759 |
|
|
Digital Platform Order Contribution Margin (1) |
|
34.1% |
|
|
|
31.7 |
% |
|
|
Active Consumers (in thousands) |
|
|
3,394 |
|
|
|
3,844 |
|
|
Average Order Value (“AOV”) – Marketplace |
|
$ |
599 |
|
|
$ |
596 |
|
|
AOV – Stadium Goods |
|
|
335 |
|
|
|
313 |
|
|
Brand Platform: |
|
|
|
|
|
|
||
|
Brand Platform GMV |
|
$ |
72,722 |
|
|
$ |
107,137 |
|
|
Brand Platform Revenue |
|
|
72,722 |
|
|
$ |
116,577 |
|
|
Brand Platform Gross Profit |
|
|
34,252 |
|
|
|
61,406 |
|
|
Brand Platform Gross Profit Margin |
|
47.1% |
|
|
|
52.7 |
% |
|
- See “Non-IFRS and Other Financial and Operating Metrics” on Page 20 for reconciliations of non-IFRS measures to IFRS measures.
Recent Business Highlights
Digital Platform
- Continued transition to full-price sales in the Farfetch Marketplace. Full-price GMV increased 20%, excluding Russia and Mainland China
-
Third-party transactions generated 81% of Digital Platform GMV
- Take rate of 31.2% in second quarter 2022 supported by record media solutions revenue
- First-party transactions grew 9% year-over-year, supported by First-Party Original, which generated 4% of Digital Platform GMV in second quarter 2022
- The Farfetch Marketplace continued to offer customers the most extensive selection of in-season luxury fashion on a global platform from over 1,400 sellers, as supply from both multi-brand retailers and e-concession partners continued to increase year-over-year to total stock units of nearly 12 million in second quarter 2022
- Signed global strategic partnership with Salvatore Ferragamo to leverage Farfetch capabilities to further accelerate its branded digital and omnichannel strategy, strengthen its presence on the Marketplace, and utilize Media Solutions to engage a younger audience, while also exploring Future Retail innovations. Farfetch Platform Solutions (FPS) also continued to add to its client roster with the launch of Sacai’s global monobrand e-commerce site
-
Continued to partner with brands on campaigns highlighting their collections on the marketplace including:
- Karl Lagerfield Spring/Summer 2022 collection launch with Amber Valletta
- De Beers new dewdrop diamond collection
- Chopard launch of their ‘Happy Sports’ campaign
- Launched collaborations between Opening Ceremony and Peter Do, and Interview Magazine and Tabboo!, the first two capsules for Farfetch BEAT, a new retail series launching exclusive limited edition product experiences in collaboration with some of the most progressive voices in fashion and culture
- In July 2022, partnered with Outlier Ventures, a leader in early-stage Web3 incubation, to launch the Dream Assembly Basecamp Web3 accelerator program, a cohort of the most promising Web3 startups in the luxury fashion and lifestyle sectors with a curated program of mentorship, networking, and support in order to help drive the future of Web3 luxury commerce
New Guards
-
New Guards’ portfolio continued to focus on direct-to-consumer channels while creating culturally relevant collections:
- Off-White collaborated with Major League Baseball and New Era Capsule in what was the first official collaboration between Off-White and a pro sports league, and partnered with Church’s for the second instalment of their genderless capsule collection
- Palm Angels opened a new directly operated store in Milan
- Heron Preston collaborated with BAPE to launch a limited edition capsule reinterpreting classics from their archive
Luxury New Retail
-
In August 2022, announced transformational partnership with Richemont which advances Luxury New Retail vision, and includes:
- FPS re-platforming of Richemont Maisons and Yoox Net-A-Porter (‘YNAP’)
- Richemont Maisons joining the Farfetch Marketplace
- Farfetch to acquire 47.5% equity stake in YNAP, subject to customary regulatory approvals, with the intention to transform the business and advance its growth and adoption of a hybrid business model. Richemont and Farfetch to have put and call options, respectively, for Farfetch to acquire the remainder of YNAP, subject to certain conditions
Environmental, Social and Governance
-
Published Farfetch’s second annual ESG report, highlighting initiatives and progress made in 2021 towards our Positively Farfetch 2030 sustainability goals including:
- 7.9% reduction in CO2-eq logistics emissions per net unit sold, equating to a 21.6% reduction in logistics emissions per net unit sold since 2019
- 92% year-over-year growth in GMV for Conscious products, with 7.4% of GMV being Conscious
- 153% year-over-year growth in total Circular units (sold or serviced) representing 2.1% of total units (sold or serviced)
- 84% of Farfetchers reported they feel included at Farfetch
- Released our Conscious Luxury Trends report on the behaviors of luxury consumers and luxury industry sustainability matters, leveraging the power of our data to provide insights to support the industry’s shift towards becoming more sustainable
- Partnered with Good on You to launch Good Measures, an online sustainability hub that helps brands understand and improve their sustainability performance
Second Quarter 2022 Results Summary
Gross Merchandise Value (in thousands):
|
|
|
Three months ended June 30, |
|
|||||
|
|
|
2021 |
|
|
2022 |
|
||
|
Digital Platform GMV |
|
$ |
913,350 |
|
|
$ |
883,130 |
|
|
Brand Platform GMV |
|
|
72,722 |
|
|
|
107,137 |
|
|
In-Store GMV |
|
|
21,739 |
|
|
|
30,181 |
|
|
GMV |
|
$ |
1,007,811 |
|
|
$ |
1,020,448 |
|
GMV increased by $12.6 million from $1,007.8 million in second quarter 2021 to $1,020.4 million in second quarter 2022, representing year-over-year growth of 1.3%. Digital Platform GMV decreased by $30.3 million from $913.4 million in second quarter 2021 to $883.1 million in second quarter 2022, representing a year-over-year decline of 3.3%. Excluding the impact of changes in foreign exchange rates, Digital Platform GMV would have increased 1.6% year-over-year.
Digital Platform GMV performance in the second quarter 2022 reflects continuing headwinds from suspension of trade in Russia, where trade has been ceased since March 2022, and China, where regional COVID-19 restrictions continue to impact orders in Mainland China. Additionally, while our shift to full-price continued in second quarter 2022, this was more than offset by a decline in markdown sales.
Brand Platform GMV increased year-over-year by 47.3% to $107.1 million or increased 68.4% year-over-year excluding the impact of changes in foreign exchange rates. This increase in GMV reflects a partial recovery from delayed shipments in first quarter 2022 and strong demand for New Guards’ brands’ Autumn-Winter 2022 collections.
In-Store GMV increased by 38.8% year-over-year to $30.2 million, driven by additional openings of New Guards brands’ stores in the last twelve months as well as growth from existing stores. Excluding the impact of changes in foreign exchange rates, In-Store GMV would have increased 52.8% year-over-year.
Revenue (in thousands):
|
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|
Three months ended June 30, |
|
|||||
|
|
|
2021 |
|
|
2022 |
|
||
|
Digital Platform Services third-party revenue |
|
$ |
208,597 |
|
|
$ |
203,347 |
|
|
Digital Platform Services first-party revenue |
|
|
140,534 |
|
|
|
152,691 |
|
|
Digital Platform Services Revenue |
|
|
349,131 |
|
|
|
356,038 |
|
|
Digital Platform Fulfilment Revenue |
|
|
83,825 |
|
|
|
79,931 |
|
|
Brand Platform Revenue |
|
|
72,722 |
|
|
|
116,577 |
|
|
In-Store Revenue |
|
|
17,635 |
|
|
|
26,801 |
|
|
Revenue |
|
$ |
523,313 |
|
|
$ |
579,347 |
|
Revenue increased by $56.0 million year-over-year from $523.3 million in second quarter 2021 to $579.3 million in second quarter 2022, representing year-over-year growth of 10.7%. The increase was driven by a 60.3% increase in Brand Platform Revenue to $116.6 million, a 52.0% growth in In-Store Revenue and an increase in Digital Platform Revenue of 0.7%. Excluding the impact of changes in foreign exchange rates, revenue would have increased 20.7% year-over-year.
Digital Platform Services Revenue increased by 2.0% year-over-year driven by first-party revenue. Digital Platform Services first-party revenue increased 8.7% primarily driven by increased markdown sales of Browns’ products on the Marketplace. Digital Platform Services third-party revenue decreased by 2.5% year-over-year impacted by the same factors driving GMV, partially offset by growth in advertising revenue.
Digital Platform Fulfilment Revenue represents the pass-through to consumers of delivery and duties charges incurred by our global logistics solutions, net of any Farfetch-funded consumer promotions, subsidized shipping and incentives. Digital Platform Fulfilment Revenue decreased 4.7% year-over-year, above the overall Digital Platform GMV decline of 3.3%, as a portion of shipping cost efficiencies in second quarter 2022 were passed through to consumers.
Brand Platform Revenue increased by 60.3% year-over-year, which was at a faster rate than GMV growth, due to the addition to revenue of $9.4 million generated by the Reebok net economic benefit from the partnership which commenced in March 2022.
Cost of Revenue (in thousands):
|
|
|
Three months ended June 30, |
|
|||||
|
|
|
2021 |
|
|
2022 |
|
||
|
Digital Platform Services third-party cost of revenue |
|
$ |
69,700 |
|
|
$ |
62,067 |
|
|
Digital Platform Services first-party cost of revenue |
|
|
94,432 |
|
|
|
106,187 |
|
|
Digital Platform Services cost of revenue |
|
|
164,132 |
|
|
|
168,254 |
|
|
Digital Platform Fulfilment cost of revenue |
|
|
83,825 |
|
|
|
79,931 |
|
|
Brand Platform cost of revenue |
|
|
38,470 |
|
|
|
55,171 |
|
|
In-Store cost of goods sold |
|
|
6,804 |
|
|
|
8,321 |
|
|
Cost of revenue |
|
$ |
293,231 |
|
|
$ |
311,677 |
|
Cost of revenue increased by $18.5 million, or 6.3%, year-over-year from $293.2 million in second quarter 2021 to $311.7 million in second quarter 2022. The increase was driven by growth in Brand Platform cost of revenue and Digital Platform Services cost of revenue.
Digital Platform Services cost of revenue increased at a slightly higher rate than Digital Platform Services Revenue, primarily due to an increased mix of first-party revenue, partially offset by a decrease in third-party Digital Platform Services cost of revenue.
Gross profit (in thousands):
|
|
|
Three months ended June 30, |
|
|||||
|
|
|
2021 |
|
|
2022 |
|
||
|
Digital Platform third-party gross profit |
|
$ |
138,897 |
|
|
$ |
141,280 |
|
|
Digital Platform first-party gross profit |
|
|
46,102 |
|
|
|
46,504 |
|
|
Digital Platform Gross Profit |
|
|
184,999 |
|
|
|
187,784 |
|
|
Brand Platform Gross Profit |
|
|
34,252 |
|
|
|
61,406 |
|
|
In-Store Gross Profit |
|
|
10,831 |
|
|
|
18,480 |
|
|
Gross profit |
|
$ |
230,082 |
|
|
$ |
267,670 |
|
Gross profit increased by $37.6 million, or 16.3%, year-over-year, to $267.7 million in second quarter 2022. Gross profit margin increased by 220 bps year-over-year to 46.2%, primarily driven by a strong margin improvement in Brand Platform.
Digital Platform Gross Profit Margin decreased by 30 bps to 52.7% in second quarter 2022, from 53.0% in second quarter 2021, as Digital Platform Services cost of revenue increased at a slightly higher rate than Digital Platform Services Revenue. The increase in Digital Platform third-party gross profit margin was more than offset by an increase in stock clearance activity on Browns products resulting from Spring-Summer 2022 season stock, which was purchased in anticipation of higher levels of consumer demand.
Brand Platform Gross Profit Margin increased 560 bps year-over-year to 52.7%, driven by the recognition of the Reebok net economic benefit and the elimination of Palm Angels royalty costs from Brand Platform cost of revenue following the acquisition of 60% of the outstanding equity interests of Palm Angels S.r.l (“Palm Angels”), the owner of the Palm Angels trademark.
Selling, general and administrative expenses by type (in thousands):
|
|
|
Three months ended June 30, |
|
|||||
|
|
|
2021 |
|
|
2022 |
|
||
|
Demand generation expense |
|
$ |
65,888 |
|
|
$ |
75,025 |
|
|
Technology expense |
|
|
34,545 |
|
|
|
31,120 |
|
|
Share-based payments |
|
|
60,173 |
|
|
|
58,069 |
|
|
Depreciation and amortization |
|
|
62,720 |
|
|
|
80,557 |
|
|
General and administrative |
|
|
150,229 |
|
|
|
185,749 |
|
|
Other items |
|
|
6,828 |
|
|
|
4,765 |
|
|
Selling, general and administrative expense |
|
$ |
380,383 |
|
|
$ |
435,285 |
|
Selling, general and administrative expenses increased by $54.9 million, or 14.4%, year-over-year, from $380.4 million in second quarter 2021 to $435.3 million in second quarter 2022.
Demand generation expense increased $9.1 million, or 13.8%, year-over-year to $75.0 million in second quarter 2022. As a percentage of Digital Platform Services Revenue, Demand generation expense was 21.1% compared to 18.9% in second quarter 2021. The increase was driven by our investment in acquiring and engaging customers in paid channels, and reflects continued cost inflation in digital marketing channels, our redeployment of demand generation spend out of Russia to higher cost markets, and our redistribution of spend as we continue to implement measures in response to the impact of Apple’s recent iOS privacy measures, to channels which exhibited higher unit costs, on average.
Our total investment in technology, which includes technology expense and our investments in longer term development projects which are treated as capital items, was 13.2% of Adjusted Revenue in second quarter 2022, as compared to 13.8% in second quarter 2021, as Adjusted Revenue growth outpaced growth of our overall technology costs.
Technology expense primarily relates to maintenance and operations of our platform features and services, as well as software, hosting and infrastructure expenses, which includes three globally distributed data centers, including one in Shanghai, which support the processing of our growing base of transactions. Technology expense decreased by $3.4 million in second quarter 2022 year-over-year, or 9.9%. This was driven by an increase in investments into capitalizable longer term development projects, including Beauty and re-platforming projects. This was offset by an underlying increase in technology staff headcount and software and hosting costs to support growth.
Depreciation and amortization expense increased by $17.9 million, or 28.5%, year-over-year from $62.7 million in second quarter 2021 to $80.6 million in second quarter 2022. Amortization expense increased principally due to increased technology investments, where qualifying technology development costs are capitalized and amortized over their useful lives, as well as amortization of the $364.1 million intangible asset recognized in relation to the Reebok partnership in March 2022. Depreciation expense increased primarily as a result of new stores and office leases entered into within the last twelve months.
Share-based payments decreased by $2.1 million, or 3.5% year-over-year in second quarter 2022 due to the decreased cost of employment related taxes and cash-settled awards, primarily as a result of the share price movement, partially offset by grants of equity-settled awards, including the performance-based restricted share unit (“PSU”) award granted to the Company’s Founder, Chairman and CEO, José Neves in May 2021.
General and administrative expense increased by $35.5 million, or 23.6%, year-over-year in second quarter 2022, reflecting an increase in warehousing costs to support increased first-party trading and scaling our operations to support our Fulfilment by Farfetch strategy plus the launch of Beauty. This was alongside the consolidation of acquired businesses and the continued impact of salary increases, which also impacted technology expense.
General and administrative expense increased as a percentage of Adjusted Revenue to 37.2% compared to 34.2% in second quarter 2021 primarily driven by slower growth in Adjusted Revenue.
Gains/(losses) on items held at fair value and remeasurements (in thousands):
|
|
|
Three months ended June 30, |
|
|||||
|
|
|
2021 |
|
|
2022 |
|
||
|
Remeasurement gains on put and call option liabilities |
|
$ |
38,864 |
|
|
$ |
162,894 |
|
|
Fair value gains on embedded derivative liabilities |
|
|
206,874 |
|
|
|
94,143 |
|
|
Fair value remeasurement of equity investment carried at fair value through profit or loss (“FVTPL”) |
|
|
– |
|
|
|
(6,335 |
) |
|
Gain on disposal of investment carried at FVTPL |
|
|
– |
|
|
|
1,461 |
|
|
Gains on items held at fair value and remeasurements |
|
$ |
245,738 |
|
|
$ |
252,163 |
|
The $162.9 million of remeasurement gains on put and call option liabilities in second quarter 2022 are related to a $123.7 million gain on the remeasurement of the put and call option resulting from the November 2020 strategic agreement with Alibaba Group Holding Limited (“Alibaba Group”) and Compagnie Financiere Richemont SA (“Richemont”), a $50.5 million remeasurement gain in connection with Chalhoub Group’s put option over their non-controlling interest in Farfetch International Limited, partially offset by a $6.8 million loss on the remeasurement of the put and call option over the 40% of Palm Angels’ share capital not owned by New Guards and a $4.4 million loss on the remeasurement of the put option over Alanui. S.r.l.
The remeasurement gains on put and call option liabilities in second quarter 2021 were related to a $38.9 million remeasurement gain in connection with the Chalhoub Group’s put option over the non-controlling interest in Farfetch International Limited.
The $94.1 million of fair value gains on embedded derivative liabilities in second quarter 2022 were primarily driven by the decrease in our share price during the period. The fair value gains on embedded derivative liabilities in second quarter 2022 are comprised of the following revaluation gains on our convertible senior notes: (i) $20.0 million fair value gains related to $250 million 5.00% notes due in 2025 (the “February 2020 Notes”); (ii) $104.4 million fair value gains related to $400 million 3.75% notes due in 2027 (the “April 2020 Notes”); and, (iii) $30.2 million fair value losses related to $600 million 0.00% notes due in 2030 (the “November 2020 Notes”). These notes have provided strong liquidity to fund ongoing capital needs and invest in various growth initiatives.
The $206.9 million fair value gains on embedded derivative liabilities in second quarter 2021 were primarily driven by the decrease in our share price during the period. The fair value gains on embedded derivative liabilities in second quarter 2021 were comprised of $88.4 million fair value gains related to the February 2020 Notes; $69.0 million fair value gains related to the April 2020 Notes; and $49.4 million fair value gains related to the November 2020 Notes.
Profit After Tax
Profit after tax decreased by $20.2 million year-over-year from $87.9 million in second quarter 2021 to $67.7 million in second quarter 2022, with the increase in gross profit of $37.6 million more than offset by an increase in selling, general and administrative expense of $54.9 million.
EPS and Diluted EPS
Second quarter 2022 basic EPS was $0.18 and diluted EPS was $(0.50). Diluted EPS assumes a full conversion of the convertible notes into shares, and that the Chalhoub liability and Farfetch China Holdings Ltd (“Farfetch China”) liability held on the statement of financial position at June 30, 2022 would have been settled in shares at the beginning of the second quarter 2022. As such, diluted EPS excludes the gains on items held at fair value and interest costs related to the Chalhoub liability, Farfetch China liability and the convertible notes, net of any applicable tax, while including all outstanding equity instruments that have a dilutive impact.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA declined by $3.
Contacts
Investor Relations Contact:
Alice Ryder
VP Investor Relations
IR@farfetch.com
Media Contacts:
Susannah Clark
SVP Communications, Global
susannah.clark@farfetch.com
+44 7788 405224
Brunswick Group
farfetch@brunswickgroup.com
US: +1 (212) 333 3810
UK: +44 (0) 207 404 5959
