The story hasn’t changed at Farfetch — José Neves is still looking to empower his retail suppliers and corner the online luxury market — but the platform’s narrative in an industry struggling with COVID-19 has taken on a new urgency.
“We’re growing in an industry that’s shrinking,” Neves, the founder, chief executive officer and co-chair of Farfetch, told WWD on Thursday. “That’s good news for brands…we are with them, trying to weather this crisis.”
Farfetch grew revenues by 90 percent for the first quarter ended March 31 and including only a few weeks of the coronavirus shutdown in the U.S. and Europe. But Neves said the platform is continuing on its upward trajectory.
“We will, I’m confident, post growth in the second quarter,” he said. “That is great news for our boutiques.”
Neves said he was focused first on the well-being of his employees and secondly on supporting the boutiques that use Farfetch as their digital portal to the world.
“Small brands are almost 100 percent dependent on wholesale,” he said. “At a time when department stores are canceling orders and late in payments, boutiques are a lifeline to small designers.”
By keeping its 700 boutique partners connected with shoppers, Neves said Farfetch is also supporting the 3,400 designer brands sold on its platform.
He said it is vital that “as we emerge from this crisis, the incredible beauty of this industry, which is the variety of the points of view, the creativity and the incredible global nature of this industry is preserved. How do we help and enable the industry to reinvent itself is what’s important. In that, we are very confident and more galvanized than I ever was in the 12 years since starting Farfetch.”
The Farfetch story continues to stand out with so much of the fashion industry in survival mode — and some, like Neiman Marcus Group, falling into insolvency.
Neves told analysts on a conference call that the digital platform was continuing to “extend our lead as the largest global online destination for in-season luxury fashion.”
“I am more confident than ever in our prospects as the global platform for the luxury fashion industry,” Neves said. “Over the course of the past decades and economic downturns, the luxury fashion industry has proven to be extremely resilient and we expect that to remain true. But one thing that has become evident over the past weeks is that the world will not go back to the same normal as we knew it pre-COVID-19.”
Neves said Farfetch had many advantages in this new world, including a resilient business model and digital platform, localized operations in China and other key markets, an enterprise solutions business with Farfetch Platform Solutions and its augmented retail strategy. Farfetch runs the gamut, owning and producing brands itself, providing a platform for other merchants and helping stores appeal to shoppers with a little extra digital savvy.
“A key structural change that will result from the COVID-19 crisis will be the need to digitize retail market luxury when customers can safely return to retail stores,” he said. “We expect it will be paramount in the new normal for physical retailers to continue to offer an enjoyable and personalized shopping experience and also implement new approaches to remain financially viable in a world where sales per square foot could otherwise drastically decline. We have been investing behind this, including our store of the future solution launch with Chanel last June….The digitization of physical retail was a distant innovation for many luxury brands and retailers, but may now be promoted from nice-to-have to must-have status.”
Farfetch has dodged the worst of the COVID-19 shutdown — and kept all its employees on the payrolls with no government supports — but the company has still had to make big adjustments.
The company temporarily closed its Browns Fashion, Stadium Goods and New Guards stores and production studios in Los Angeles. A studio in Hong Kong was also closed, but is now fully operational.
Most employees are also working from home.
But given the distributed nature of the company’s platform, Farfetch has been able to keep products flowing. Eighty-five percent of the looks in the site’s main spring catalogue were available from multiple sellers.
Farfetch also shifted its marketing focus away from Western markets as consumers adapted to COVID-19 disruptions and reemphasized its business in China as the country started to open back up.
For the first quarter, Farfetch revenues continued to rise sharply to $331.4 million from $174 million as the company expanded, including through the controversial acquisition of Off-White licensee New Guards Group. The gross merchandise value of goods sold on the Farfetch platform increased by 46 percent to $610.9 million.
Losses for the quarter widened slightly to $79.2 million from $77.7 million a year ago and adjusted losses before interest, taxes, depreciation and amortization narrowed to $22.3 million from $30.2 million.
The company continues to target adjusted earnings before interest, taxes, depreciation and amortization in 2021.
Farfetch — like every company that was able during the past couple months — has added a little extra financial cushion. The company ended the quarter with $422 million in cash and cash equivalents and then raised an additional $400 million in April through the sale of convertible senior notes.