Farfetch, the online marketplace for luxury fashion, reported a decline in its gross merchandise value (GMV) for the third quarter. The company’s GMV dropped by 4.9% to $967.4 million; however, it increased by 4.2% when adjusted for currency fluctuations. The digital platform GMV also decreased by 5% to $787.4 million but saw a 2.6% growth at stable exchange rates. Similarly, the brand platform GMV declined by 10.4% to $148.1 million, but it would have been 4.9% higher without the impact of currency fluctuations.

Despite the decrease in GMV, Farfetch managed to achieve a 1.9% increase in overall revenue, reaching $593.4 million. If exchange rates had remained the same as the previous year, the company would have seen a significant 14.1% increase in revenue. The decrease in digital platform GMV was mainly attributed to the suspension of trade in Russia and mainland China, as well as ongoing restrictions due to the Covid-19 pandemic. Additionally, the dip in average order value (AOV) on the Farfetch marketplace, from $593 to $530, was primarily due to the strengthening US dollar and a decline in average selling price. However, this was partially offset by an increase in the number of items per order.

Despite these challenges, Farfetch reported positive gross profit and order contribution margins. The gross profit margin increased by 160 basis points to 44.9%, while the digital platform order contribution margin rose by 580 basis points to 32.4%. However, due to higher growth in general and administrative expenses compared to adjusted revenue growth, the company experienced an adjusted EBITDA loss of $4.1 million, compared to a profit of $5.3 million in the previous year. Furthermore, the net loss for the quarter amounted to $274.9 million, in contrast to a profit of $769.1 million in the same period last year.

Despite these setbacks, Farfetch remains optimistic about its future. CFO Elliot Jordan expressed confidence in the company’s ability to navigate the macro environment successfully, expecting a return to profitable growth in 2023. Farfetch continues to collaborate with brands on marketplace campaigns and has expanded its Fashion Concierge services to assist private clients in sourcing luxury items. Furthermore, its subsidiary, New Guards Group, is prioritizing direct-to-consumer channels and creating culturally relevant collections.

In terms of physical stores, Farfetch witnessed a notable increase in in-store GMV of 35.3% to $31.9 million during the quarter, thanks to the opening of new stores for New Guards brands and strong like-for-like growth from existing stores. Looking ahead, the company forecasts a decline of 5% to 7% in digital platform GMV and relatively flat brand platform GMV for the full year. Despite the challenges faced by the luxury fashion industry, Farfetch remains confident in its long-term vision and ability to overcome obstacles.

Useful links:
1. Farfetch
2. Farfetch quarterly results