Jose Neves70th Annual Parsons Benefit, New York, USA - 21 May 2018

José Neves wears many hats at Farfetch, including founder, chief executive officer and co-chair — in addition to cheerleader and Wall Street punching bag — but his most important job right now might be explainer in chief. 

Coming into third-quarter results Thursday afternoon, Neves needed to reassure investors that the evolution of Farfetch with the addition of New Guards Group, a brand platform that holds the license for Virgil Abloh’s Off-White, was a step in the right direction. 

Neves seems to have gotten a good start as Farfetch shares shot up 28.7 percent to $9.63 in midday trading Friday as Neves presented positive business trends and a better argument for New Guards (although the stock is still 47 percent down from the $18.25 it was trading at just before the $675 million New Guards deal in August). 

Neves told WWD in an interview Friday morning that investors are coming around. 

“These things take time to settle, for people to digest them,” he said. “We’re very, very excited with the acquisition. New Guards is a platform. They use common infrastructure and a comment model and modus operandi to launch a portfolio” of brands that in addition to Off-White includes Heron Preston, Palm Angels and, most recently Korean DJ Peggy Gou’s line with Kirin. (New Guards has a licensing deal with Off-White that cannot be renegotiated or terminated until 2026 and runs through 2035).

“This is now integrated with our business,” the ceo said of the New Guards, which has driven nearly $63 million in gross merchandise volume for Farfetch since the Aug. 9 acquisition. “They’re now selling directly to consumers with our platform.” 

And the brands, as a group, outsell any single brand on Farfetch.

The idea is that New Guards is not so much an apparel manufacturer, but an asset-lite brand platform that will continue to produce hot new names. He pointed to the line from Guo, who has not just a big global following, but also “a very strong aesthetic.” 

“You will see more of this type of launch,” Neves said. “There is a pipeline obviously. The new brands that we will be adding will be primarily available only on Farfetch and our boutiques.” 

Neves compared the approach to what Spotify did as it expanded from music into podcasting, noting, “No one understood it in the beginning.” He also pointed to Netflix, which similarly expanded from delivering movies and TV shows to making them and noted that “creating original content completely changes the dynamic of a platform.” 

Just how the Farfetch dynamic continues to change remains to be seen, but the company has proven adept at taking on a business and making it something new. 

The company bought London retailer Browns in 2015 and has been in expansion mode, in both the digital and physical worlds. 

“When we acquired the company it was quite small,” Neves said. “It’s now approaching $200 million in [annual] revenues.”  

Browns is moving from its long-time home on South Molton Street to nearby Brook Street and will offer a fresh vision of connected retail that is informed by Farfetch’s work with Chanel that is helping to bring some digital savvy to the uber luxe experience. 

Neves said the company has not fully “unveiled” the details of its project with Chanel, but that customers and store associates both have apps that converse to improve the shopping experience. 

“All of that is done in a very elevated and seamless way,” he said. “As great technology should be, the less you see it, the better it is.”

The opposite is true for fashion-tech growth stories on Wall Street — investors would prefer to see just where the growth they’re betting on is coming from and in excruciating detail. 

At least for now, the Street seems to feel it’s getting a little more of that. Third-quarter results showed the firm’s margin on adjusted losses before interest, taxes, depreciation and amortization improved to 15.6 percent from 28.7 percent.

“The bull case isn’t necessarily back, but this was a much needed step in the right direction,” said Wells Fargo analyst Ike Boruchow said of the third-quarter update. 

Pinpointing the differences between the third- and second-quarter reports, Boruchow said: Sales and EBITDA [earnings before interest, taxes, depreciation and amortization] numbers are “moving up, not down,” the path to profitability was clearer with the company signaling to break even by fiscal 2021 and that there was no fresh dealmaking.

“There was no new M&A to digest, and on top of that, we feel there’s greater clarity regarding the new NGG acquisition, where the strategy was more clearly articulated on the call by management,” Boruchow said. 

 Mark that as a win for Neves as explainer in chief.

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