- Expects Q1 2020 GMV Growth of 43% to 46%, with Digital
Platform GMV Growth of 17% to 19%
- Estimates Q1 2020 Adjusted EBITDA of $(21) million to $(25)
million, ahead of guidance
- Estimates Q1 2020 Loss After Tax (including non-cash items)
of $(70) million to $(125) million
- Expects Q1 2020 Digital Platform Order Contribution Margin
in line with Q4 2019
- Cash and Cash Equivalents of approximately $420 million at
March 31, 2020
- China Region GMV in latter two months of Q1 2020 grew faster
than full year 2019
- Continues to target Adjusted EBITDA profitability for full
year 2021
- Suspends full year 2020 guidance in light of evolving
COVID-19 situation
Farfetch Limited (NYSE: FTCH), the leading global platform for
the luxury fashion industry, today provided a business update in
light of the evolving COVID-19 global health pandemic, and reported
preliminary financial results for the first quarter ended March 31,
2020. Farfetch has also published a letter from Founder, CEO and
Co-Chair, José Neves, discussing the performance and broader
perspectives on the business. The letter is available on the
Company's Investor Relations website at farfetchinvestors.com in
the Financial News section.
José Neves, Farfetch Founder, CEO and Co-Chair said: “Our top
priority has been protecting the health and well-being of our
employees, partners and customers. At the same time, we have
continued to focus on executing on our strategic and financial
objectives. Much like we did during the 2008 financial crisis,
Farfetch has been focused on supporting the luxury industry in
navigating the rapidly changing environment to provide a platform
for the industry so that it can flourish in the longer-term. In
this spirit, we launched our #SupportBoutiques initiative to
harness the power of our community to meaningfully help the
hundreds of boutiques across our seller base, the majority of which
are small businesses.
”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.”
Business Performance
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.
As a result, we expect to deliver strong Digital Platform GMV
growth in first quarter 2020, supported by the performance of our
China region, which continued to grow faster than the overall
marketplace, and from February 1, 2020, accelerated to grow faster
year-on-year than this region grew for all of 2019.
We expect first quarter 2020 Digital Platform Order Contribution
Margin to be in line with fourth quarter 2019, and exceed our
targeted minimum of 30%. This reflects our continued focus on
engaging with our customers across our broad range of channels,
while optimizing our supply chain operations.
Additionally, the Brand Platform is also expected to deliver GMV
of approximately $105 million, in line with expectations.
First quarter 2020 Adjusted EBITDA is expected to be $(21)
million to $(25) million, ahead of our guidance, and a
year-over-year improvement in absolute amount. This reflects our
continued focus on driving efficiencies and operating leverage
across the quarter, as well as reductions in discretionary spend in
light of the evolving circumstances.
While current market data is not sufficient to indicate how
consumers, competitors and producers might behave in the
short-term, during a prolonged lockdown or as 2020 continues to
evolve, we continue to monitor our business closely.
Towards the latter part of the quarter, we have observed:
- A slowdown in growth from our larger markets in Europe and
North America. This was not unexpected as various countries
continued to implement lockdown policies.
- An increase in promotional activity from some industry
participants.
- Brands assessing production capacities for winter collections
in light of some factory closures.
As such, we remain alert and are planning our business with a
variety of scenarios including various degrees of reductions in
overall demand and supply across the platform, with differing
impacts to our near-term profitability. Additionally, while we have
not seen any material impact to our diversified supply and
logistics platform to date, any prolonged interruptions to, or
cessations of the operations of our fulfilment centers and
production studios, or our sellers and logistics partners would
have a material adverse impact on our business.
We believe the secular trends will drive an acceleration of
sales to online channels, and a return to normalized levels of
consumer activity in 2021. This scenario would support our ability
to deliver profitability at the Adjusted EBITDA level for 2021 as
planned.
In terms of liquidity, we expect to end first quarter 2020 with
cash and cash equivalents of approximately $420 million. The cash
outflow in first quarter 2020 is primarily a result of the working
capital outflow between the larger balance in fourth quarter 2019,
as compared to first quarter 2020. As has been the case in previous
years, we expect this position to reverse as we trade through the
seasonal calendar. In light of the evolving situation, we have also
taken actions to further support our liquidity in the
short-term.
Preliminary Results
The following table provides select preliminary results for the
three months ended March 31, 2020:
Three Months Ended
March 31, 2020
Preliminary Results
($ in millions)
Consolidated Group:
Gross Merchandise Value (“GMV”)
Growth of 43% to 46%
Loss after tax
$(70) to $(125)
Adjusted EBITDA
$(21) to $(25)
Cash and cash equivalents
Approximately $420
Digital Platform:
Digital Platform GMV
Growth of 17% to 19%
Brand Platform:
Brand Platform GMV
Approximately $105
See “Metrics Definitions” on page 5 for further explanations,
including the renaming of previous “Platform” metrics to “Digital
Platform” metrics. See “Non-IFRS and Other Financial and Operating
Metrics” on page 5 for preliminary reconciliation of estimated
Adjusted EBITDA to loss after tax.
Financial Disclosure Advisory
We have not yet completed our reporting process for the three
months ended March 31, 2020. The preliminary results presented
herein are based on our reasonable estimates and the information
available to us at this time and, because of their preliminary
nature, we have provided ranges, rather than specific amounts. As
such, our actual results may materially vary from the preliminary
results presented herein and will not be finalized until we report
our final results for first quarter 2020 after the completion of
our normal quarter end accounting procedures including the
execution of our internal controls over financial reporting.
These estimates should not be viewed as a substitute for our
full interim results prepared in accordance with IFRS. Accordingly,
you should not place undue reliance on this preliminary data.
This data has been prepared by, and is the responsibility of,
Farfetch management. Our independent registered public accounting
firm has not audited, reviewed, compiled, or performed any
procedures with respect to the preliminary financial results.
Accordingly, it does not express an opinion or any other form of
assurance with respect thereto.
Outlook
In light of the uncertainty surrounding the evolving COVID-19
global health pandemic situation, the Company is suspending its
previously issued guidance for full year 2020 at this time, but
remains focused on its path to profitability and continues to
target Adjusted EBITDA profitability for full year 2021.
Forward Looking Statements
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
All statements contained in this release that do not relate to
matters of historical fact should be considered forward-looking
statements, including, without limitation, statements regarding our
expected financial performance and operational performance for the
first quarter of 2020 and fiscal year ending December 31, 2020, the
impact of the COVID-19 pandemic on our operations and supply chain
and the broader luxury industry, as well as statements that include
the words “expect,” “intend,” “plan,” “believe,” “project,”
“forecast,” “estimate,” “may,” “should,” “anticipate” and similar
statements of a future or forward-looking nature. These
forward-looking statements are based on management’s current
expectations. These statements are neither promises nor guarantees,
but involve known and unknown risks, uncertainties and other
important factors that may cause actual results, performance or
achievements to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements, including, but not limited to:
purchasers of luxury products may not choose to shop online in
sufficient numbers; our ability to generate sufficient revenue to
be profitable or to generate positive cash flow on a sustained
basis; the volatility and difficulty in predicting the luxury
fashion industry; our reliance on a limited number of retailers and
brands for the supply of products on our Marketplace; our reliance
on retailers and brands to anticipate, identify and respond quickly
to new and changing fashion trends, consumer preferences and other
factors; our reliance on retailers and brands to make products
available to our consumers on our Marketplace and to set their own
prices for such products; fluctuation in foreign exchange rates;
our reliance on information technologies and our ability to adapt
to technological developments; our ability to acquire or retain
consumers and to promote and sustain the Farfetch brand; our
ability or the ability of third parties to protect our sites,
networks and systems against security breaches, or otherwise to
protect our confidential information; our ability to successfully
launch and monetize new and innovative technology; our acquisition
and integration of other companies or technologies, for example,
Stadium Goods and New Guards, could divert management’s attention
and otherwise disrupt our operations and harm our operating
results; we may be unsuccessful in integrating any acquired
businesses or realizing any anticipated benefits of such
acquisitions; our dependence on highly skilled personnel, including
our senior management, data scientists and technology
professionals, and our ability to hire, retain and motivate
qualified personnel; our ability to successfully implement our
business plan during a global economic downturn caused by the
COVID-19 pandemic that may impact the demand for our products and
services or have a material adverse impact on our or our business
partners’ financial condition and results of operations; José
Neves, our chief executive officer, has considerable influence over
important corporate matters due to his ownership of us, and our
dual-class voting structure will limit your ability to influence
corporate matters, including a change of control; and the other
important factors discussed under the caption “Risk Factors” in our
Annual Report on Form 20-F filed with the U.S. Securities and
Exchange Commission (“SEC”) for the fiscal year ended December 31,
2019, as such factors may be updated from time to time in our other
filings with the SEC, which are accessible on the SEC’s website at
www.sec.gov and on our website at http://farfetchinvestors.com. In
addition, we operate in a very competitive and rapidly changing
environment. New risks emerge from time to time. It is not possible
for our management to predict all risks, nor can we assess the
impact of all factors on our business or the extent to which any
factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking
statements that we may make. In light of these risks, uncertainties
and assumptions, the forward-looking events and circumstances
discussed in this release are inherently uncertain and may not
occur, and actual results could differ materially and adversely
from those anticipated or implied in the forward-looking
statements. Accordingly, you should not rely upon forward-looking
statements as predictions of future events. In addition, the
forward-looking statements made in this release relate only to
events or information as of the date on which the statements are
made in this release. Except as required by law, we undertake no
obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise, after the date on which the statements are made or to
reflect the occurrence of unanticipated events.
Metrics Definitions
The introduction of the term “Digital Platform” with reference
to GMV, Revenue and other metrics is intended to distinguish
between activities that occurred through our owned and operated
e-commerce platforms (e.g. Farfetch.com, BrownsFashion.com,
off---white.com) and the Brand Platform operations of New Guards,
where GMV and Revenue are derived from our transactions with
independent third party retailers or wholesalers. Such metrics were
previously referred to as “Platform.” No changes have been made to
how we calculate the Digital Platform metrics from how we
calculated Platform metrics.
Non-IFRS and Other Financial and Operating Metrics
This release includes or references certain financial measures
not based on IFRS, including Adjusted EBITDA, Digital Platform
Gross Profit Margin, Digital Platform Order Contribution, and
Digital Platform Order Contribution Margin (together, the “Non-IFRS
Measures”), as well as operating metrics, including GMV, Digital
Platform GMV, Brand Platform GMV, In-Store GMV and Active
Consumers.
Management uses the Non-IFRS Measures:
- as measurements of operating performance because they assist us
in comparing our operating performance on a consistent basis, as
they remove the impact of items not directly resulting from our
core operations;
- for planning purposes, including the preparation of our
internal annual operating budget and financial projections;
- to evaluate the performance and effectiveness of our strategic
initiatives; and
- to evaluate our capacity to fund capital expenditures and
expand our business.
The Non-IFRS Measures may not be comparable to similar measures
disclosed by other companies, because not all companies and
analysts calculate these measures in the same manner. We present
the Non-IFRS Measures because we consider them to be important
supplemental measures of our performance, and we believe they are
frequently used by securities analysts, investors and other
interested parties in the evaluation of companies. Management
believes that investors’ understanding of our performance is
enhanced by including the Non-IFRS Measures as a reasonable basis
for comparing our ongoing results of operations. Many investors are
interested in understanding the performance of our business by
comparing our results from ongoing operations period over period
and would ordinarily add back non-cash expenses such as
depreciation, amortization and items that are not part of normal
day-to-day operations of our business. By providing the Non-IFRS
Measures, together with reconciliations to IFRS, we believe we are
enhancing investors’ understanding of our business and our results
of operations, as well as assisting investors in evaluating how
well we are executing our strategic initiatives.
Items excluded from the Non-IFRS Measures are significant
components in understanding and assessing financial performance.
The Non-IFRS Measures have limitations as analytical tools and
should not be considered in isolation, or as an alternative to, or
a substitute for loss after tax, revenue or other financial
statement data presented in our consolidated financial statements
as indicators of financial performance. Some of the limitations
are:
- such measures do not reflect our expenditures, or future
requirements for capital expenditures or contractual
commitments;
- such measures do not reflect changes in our working capital
needs;
- such measures do not reflect our share based payments, income
tax expense or the amounts necessary to pay our taxes;
- although depreciation and amortization are eliminated in the
calculation of Adjusted EBITDA, the assets being depreciated and
amortized will often have to be replaced in the future and such
measures do not reflect any costs for such replacements; and
- other companies may calculate such measures differently than we
do, limiting their usefulness as comparative measures.
Due to these limitations the Non-IFRS Measures should not be
considered as measures of discretionary cash available to us to
invest in the growth of our business and are in addition to, not a
substitute for or superior to, measures of financial performance
prepared in accordance with IFRS. In addition, the Non-IFRS
Measures we use may differ from the non-IFRS financial measures
used by other companies and are not intended to be considered in
isolation or as a substitute for the financial information prepared
and presented in accordance with IFRS. Furthermore, not all
companies or analysts may calculate similarly titled measures in
the same manner. We compensate for these limitations by relying
primarily on our IFRS results and using the Non-IFRS Measures only
as supplemental measures.
Digital Platform Order Contribution and Digital Platform Order
Contribution Margin are not measurements of our financial
performance under IFRS and do not purport to be alternatives to
gross profit or loss after tax derived in accordance with IFRS. We
believe that Digital Platform Order Contribution and Digital
Platform Order Contribution Margin are useful measures in
evaluating our operating performance within our industry because
they permit the evaluation of our digital platform productivity,
efficiency and performance. We also believe that Digital Platform
Order Contribution and Digital Platform Order Contribution Margin
are useful measures in evaluating our operating performance because
they take into account demand generation expense and are used by
management to analyze the operating performance of our digital
platform for the periods presented.
The following table provides a preliminary reconciliation of
Adjusted EBITDA to the most directly comparable IFRS measure, loss
after tax:
(in $ thousands, except as otherwise
noted)
First Quarter 2020
Estimate
Low
High
Loss after tax
$
(70,000
)
$
(125,000
)
Net finance expense
34,000
38,000
Income tax expense
1,500
3,000
Depreciation and amortization
53,000
58,000
Share based payments
27,000
32,000
Gains on items held at fair value (a)
(70,000
)
(36,000
)
Other items (b)
3,500
5,000
Share of results of associates
-
-
Adjusted EBITDA
$
(21,000
)
$
(25,000
)
- Represents gains on items held at fair value, including the
revaluation of liabilities held at fair value and impacted by
movements in our share price, in respect of our partnership with
Chalhoub Group and of the embedded derivative financial liability
associated with our convertible senior notes issued in February
2020.
- Represents other items, which are outside the normal scope of
our ordinary activities, namely transaction-related legal and
advisory expenses. Other items is included within selling, general
and administrative expenses.
We define our non-IFRS and other financial and operating metrics
as follows:
“Active Consumers” means active consumers on our directly owned
and operated sites and related apps. A consumer is deemed to be
active if they made a purchase within the last 12-month period,
irrespective of cancellations or returns. Active Consumers includes
Farfetch Marketplace, BrownsFashion.com and Stadium Goods. Due to
technical limitations, Active Consumers is unable to fully de-dupe
Stadium Goods consumers from Farfetch Marketplace or
BrownsFashion.com consumers. Active Consumers does not currently
include those generated from New Guards owned and operated sites.
The number of Active Consumers is an indicator of our ability to
attract and retain our consumer base to our platform and of our
ability to convert platform visits into sale orders.
“Adjusted EBITDA” means loss after taxes before net finance
expense/(income), income tax (credit)/expense and depreciation and
amortization, further adjusted for share based compensation
expense, share of results of associates and items outside the
normal scope of our ordinary activities (including other items,
within selling, general and administrative expenses, and
(losses)/gains on items held at fair value through profit and
loss). Adjusted EBITDA provides a basis for comparison of our
business operations between current, past and future periods by
excluding items that we do not believe are indicative of our core
operating performance. Adjusted EBITDA may not be comparable to
other similarly titled metrics of other companies.
“Brand Platform Gross Profit” means Brand Platform Revenue less
the direct cost of goods sold relating to Brand Platform
Revenue.
“Brand Platform GMV” means revenue relating to the New Guards
operations less revenue from New Guards’: (i) owned e-commerce
websites, (ii) direct to consumer channel via our Marketplaces and
(iii) directly operated stores. Revenue realized from Brand
Platform is equal to GMV as such sales are not commission
based.
“Digital Platform Fulfilment Revenue” means revenue from
shipping and customs clearing services that we provide to our
digital consumers, net of Farfetch-funded consumer promotional
incentives, such as free shipping and promotional codes. Digital
Platform Fulfilment Revenue was referred to as Platform Fulfilment
Revenue in previous filings with the SEC.
“Digital Platform GMV” means GMV excluding In-Store GMV and
Brand Platform GMV. Digital Platform GMV was referred to as
Platform GMV in previous filings with the SEC.
“Digital Platform Gross Profit” means gross profit excluding
In-Store Gross Profit and Brand Platform Gross Profit. Digital
Platform Gross Profit was referred to as Platform Gross Profit in
previous filings with the SEC.
“Digital Platform Order Contribution” means Digital Platform
Gross Profit after deducting demand generation expense, which
includes fees that we pay for our various marketing channels.
Digital Platform Order Contribution provides an indicator of our
ability to extract digital consumer value from our demand
generation expense, including the costs of retaining existing
consumers and our ability to acquire new consumers. Digital
Platform Order Contribution was referred to as Platform Order
Contribution in previous filings with the SEC.
“Digital Platform Order Contribution Margin” means Digital
Platform Order Contribution calculated as a percentage of Digital
Platform Services Revenue. Digital Platform Order Contribution
Margin was referred to as Platform Order Contribution Margin in
previous filings with the SEC.
“Digital Platform Services Revenue” means Revenue less Digital
Platform Fulfilment Revenue, In-Store Revenue and Brand Platform
Revenue. Digital Platform Services Revenue is driven by our Digital
Platform GMV, including revenue from first-party sales, and
commissions from third-party sales. The revenue realized from
first-party sales is equal to the GMV of such sales because we act
as principal in these transactions, and thus related sales are not
commission based. Digital Platform Services Revenue was also
referred to as Adjusted Platform Revenue or Platform Services
Revenue in previous filings with the SEC.
“Gross Merchandise Value” (“GMV”) means the total dollar value
of orders processed. GMV is inclusive of product value, shipping
and duty. It is net of returns, value added taxes and
cancellations. GMV does not represent revenue earned by us,
although GMV and revenue are correlated.
“In-Store Gross Profit” means In-Store Revenue less the direct
cost of goods sold relating to In-Store Revenue.
“In-Store GMV” and “In-Store Revenue” mean revenue generated in
our retail stores which include Browns, Stadium Goods and New
Guards’ directly operated stores. Revenue realized from In-Store
sales is equal to GMV of such sales because such sales are not
commission based.
Certain figures in the release may not recalculate exactly due
to rounding. This is because percentages and/or figures contained
herein are calculated based on actual numbers and not the rounded
numbers presented.
About Farfetch
Farfetch Limited is the leading global technology platform for
the luxury fashion industry. Our mission is to be the global
platform for luxury fashion, connecting creators, curators and
consumers. Founded in 2007 by José Neves for the love of fashion,
and launched in 2008, Farfetch began as an e-commerce marketplace
for luxury boutiques around the world. Today the Farfetch
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. Farfetch’s additional businesses
include Farfetch Platform Solutions, which services enterprise
clients with e-commerce and technology capabilities; Browns and
Stadium Goods, which offer luxury products to consumers; and New
Guards, a platform for the development of global fashion brands.
Farfetch also invests in innovations such as its Store of the
Future augmented retail solution, and develops key technologies,
business solutions, and services for the luxury fashion
industry.
For more information, please visit www.farfetchinvestors.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20200416005446/en/
Investor Relations: Alice
Ryder VP Investor Relations IR@farfetch.com
Media: Susannah Clark VP
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
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