“We doubled this business in the last three years, so we grew more than any other online luxury company or etailer,” Neves, who is founder, chairman and chief executive officer, told WWD in an interview. “No one doubled. Even the most successful brands haven’t doubled.”
But Wall Street is a very what-have-you-done-for-me-lately crowd and shares of Farfetch fell 11.3 percent to $8.11 on Friday after the company’s third-quarter gross merchandise volume slipped 4.9 percent to $967.4 million (a 4.2 percent increase in constant currencies) as adjusted losses before interest, taxes, depreciation and amortization tallied $4.1 million.
Investors have tended to run hot and cold on Farfetch, with swings in sentiment that range from seeing the company as the best thing ever to a platform whose promise hasn’t materialized in one way or another.
Neves painted this year as a stretch made more difficult by macro factors beyond Farfetch, but also as an opportunity to focus the business and trim costs after a dramatic expansion.
The company lost 7 percent of its marketplace business when it shuttered its operations in Russia following President Vladimir Putin’s invasion of Ukraine. On top of that, China is down by double digits given lockdowns tied to that country’s zero-COVID-19 policies.
That’s big hits to what were the marketplace’s second- and third-largest markets last year.
And then the strong dollar and currency headwinds cut what would have been a 14.1 percent increase in revenues to a 1.9 percent bump up, to $593.4 million for the quarter.
“We have proven that this business is fundamentally cash-flow-positive in a normalized year,” Neves said.
This just isn’t a normal year.
And Neves said the company would have grown if the closure of Russia were taken out of the equation, with the company’s momentum overcoming lockdowns in China and the strong dollar.
“As with all things in life, these things go up and then come down,” Neves said.
While Farfetch follows the ebb and flow, it is working on a dizzying array of growth vehicles.
The company has inked deals to gain control of Yoox Net-a-porter, to power the digital businesses of Neiman Marcus and Ferragamo and to make Reebok goods through its New Guards Group. Farfetch also launched beauty this year and has Stadium Goods, Browns, a store of the future project and other initiatives underway.
It’s been a heady few years for Farfetch and during this pause, Neves has refocused the business, trimming costs and headcounts to put resources behind the growth and future growth engine.
“When you have this COVID[-19] surge in demand and you have all these opportunities and all this growth you are not optimizing for efficiency,” the CEO said. “We have to look at these times as an opportunity to look at your organization, that’s what we’ve done.”
Jessica Ramírez, senior research analyst at Jane Hali & Associates, said Farfetch has changed the global digital landscape in luxury.
“It is a very innovative and disruptive company,” said Ramírez, pointing to the way it “brought luxury into e-commerce, the way it’s worked with brands and brought to life the luxury shopping experience.”
But it is also a tough time now to be playing so heavily in technology.
“They’ll grow,” Ramírez said of Farfetch. “What scares investors is that it is a tech company at heart so there’s a lot of money that goes into that that you can also hemorrhage. Digital will take you far into the future and it will futureproof your company, but you have to balance everything else.”
Neves said the company is sticking to its mission, its “north star,” which is to build a platform for the global luxury industry.
“We have our eyes firmly on the north star and our feet firmly on the ground,” he said, noting the company had consistently hit its profitability targets.
“When we say that in 2023 we are going to be back to growth, we’ve been here before,” he said.