Many companies are in a panic as the tit-for-tat trade war between the U.S. and China reaches a boiling point — and yet more tariffs loom.
But luxury platform Farfetch isn’t one of them. The company is launching on JD.com’s platform through its planned acquisition of Toplife, which is expected to be completed by June, and is charging ahead in China.
José Neves, founder, chief executive officer and cochair of Farfetch, told analysts on a conference call following the release of the company’s first-quarter results that the impact of all new levies between the two superpowers is “immaterial” to his business.
“The U.S. is really a tiny fraction of our supply into China and China into the U.S. is zero,” he said, adding that 90 percent of sales in China are European products and that is unlikely to change.
Brushing off concerns over the effect of the escalating trade dispute on the Asian giant’s economy, he was bullish about its future, stressing that it is a very “resilient market,” especially due to its young, digitally savvy consumers.
“China remains an absolute strategic priority for all brands in the industry,” he said, noting that it’s the fastest-growing luxury goods market. “Brands know that they need to crack China and they need to crack China digitally.”
This came as shares in Farfetch fell just over 4 percent to $24.31 in after-market trading. Revenue leapt 39 percent $174.1 million in the first quarter, beating estimates of around $171 million, but investors zeroed in on the bottom line.
While Farfetch has enjoyed a meteoric rise, it has yet to turn a profit and losses after tax in fact widened by $58.5 million to $109.3 million, or 36 cents a share.
On an adjusted basis, losses were 22 cents a share, compared with analysts’ expectations of adjusted losses of 14 cents.
There were signs, however, that the company will eventually catch up, with its gross merchandise value increasing to $419.3 million from $292.7 million, representing year-over-year growth of 43.2 percent. This was due to a 64 percent increase in active consumers to 1.7 million.
According to Neves, this outpaced both Farfetch’s expectations and, by some distance, growth in the online personal luxury goods sector as it continued to gain market share.
Speaking to WWD, he said: “In terms of the overall profitability of the business, now is the time to invest. We have a $100 billion incremental online luxury opportunity in the next seven to 10 years and we want to be market leaders in this industry, which means now is the time to invest in the long term, to invest in the quality of services we give our brands and our boutiques and our consumers. Not on short-term profitability.”
Farfetch has already drawn the interest of significant 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. As well as launching Farfetch on JD.com’s platform, the business highlights for the quarter included:
• Launching its first Store of the Future augmented retail pilot for shareholder Chanel in its new Paris flagship boutique just 15 months after entering an exclusive partnership.
• Piloting the Second Life buyback program, enabling customers to trade their designer handbags for credit toward future Farfetch purchases.
• Entering the sneaker resale market through the acquisition of Stadium Goods.