Farfetch Stock Soars as José Neves Vision Takes Shape – WWD

Even in a world of luxury throwback stories, Farfetch’s pandemic run stands out.

The digital platform closed 2021 with a milestone of profitability – its first annual adjusted earnings before interest, taxes, depreciation and amortization.

And while Farfetch is just dipping its toe into the profit pool, with adjusted EBITDA of $1.6 million, revenue is growing strongly. And Farfetch’s gross merchandise volume surpassed $4.2 billion last year, bringing the company to twice its size in 2019 and highlighting how COVID-19 has accelerated the shift from luxury on the web.

This year, Farfetch plans to build on those gains as Founder, Chairman and CEO José Neves continues to try to build high fashion bridges – in style with Violet Grey; with Reebok; with its platform services business; in advertising; with Alibaba, and through ongoing discussions with Johann Rupert’s Compagnie Financière Richemont. (If successful, those talks could see Farfetch fuel the digital expansion of fellow Cartier and Richemont houses and also make a minority investment in e-commerce platform Yoox Net-a-porter).

On Wall Street – where Neves and company are used to being pummeled for controversial moves and then cheered when the bets pay off – the bulls have taken over. Farfetch shares jumped 29.2% to $19.39 in the secondary market on the company’s earnings.

Neves has argued — seemingly successfully, so far — that Farfetch only has 2% of the $300 billion personal luxury goods business and plenty of room to continue growing as the industry s expands to $500 billion by 2025.

And now he’s growing up with one of his childhood favourites, having signed a deal with Authentic Brands Group, which is days away from buying Reebok from Adidas. ABG is partnering with Farfetch’s New Guards Group, which will be the brand’s primary operating partner across Europe and will also exclusively create and distribute premium collaboration products for Reebok in over 50 countries.

“It’s a brand, when I was a kid one of my dreams was to own a Reebok pump, they were super cool and super expensive,” Neves told WWD on Thursday, referring to the sneaker that could be inflated to fit perfectly.

Neves said New Guards, which transformed Palm Angels into an elevated streetwear powerhouse in just four years, can do great things with Reebok.

“If you go back to this archive, it’s a treasure trove of cultural icons, one after another,” he said. “Over time, we will realize that this can be a really big move for Reebok and the history of streetwear.”

With Reebok, Neves is once again showing its ability to connect and stay in touch with key fashion players, in this case, Jamie Salter, Founder, Chairman and CEO of ABG and one of the main industry negotiators in recent years.

“We were very ambitious and when we saw the Reebok opportunity I called Jamie and said, ‘Hey, we need to talk because we think we can do a lot of groundbreaking things with this brand,'” Neves said. “And the teams have been absolutely thrilled and we think that can be really amazing.”

And it could always lead to more.

“With this deal, I’ve developed a fantastic relationship with Jamie Salter and I think what they’re doing is amazing and who knows, maybe it will lead to future collaborations,” he said.

That could lead just about anywhere given ABG’s extensive portfolio, which includes Airwalk, Barneys New York, Brooks Brothers, Vision Streetwear and many more.

Although he works in the ultra-competitive world of luxury fashion, Neves preaches the virtue of partnerships in a world of high digital growth in luxury.

“To me, it’s really like the pie is getting bigger so fast that it makes a lot more sense to have a spirit of partnership than to have a spirit of competition,” he said. “We don’t compete with retailers, we see them as potential partners.”

Jose Neves
Courtesy picture

Farfetch’s fourth-quarter net profit hit $96.9 million, compared with losses of $2.3 billion a year earlier, when embedded derivative liabilities skewed the results. Revenue for the three months ended Dec. 31 rose 23.2% to $665.7 million from $540.1 million a year earlier.

For the full year, Farfetch reported net profits of $1.5 billion, compared to losses of $3.3 billion in 2020. Revenue for the year increased 34.8% to reach $2.3 billion, with gross merchandise volume up 33%.

This year, Farfetch expects its digital platform GMV to grow 28-32%, while its branded platform GMV will grow 20-25% with an adjusted EBITDA margin of 1-2%.

Neves told analysts on a conference call, “We emerge from this pandemic stronger than ever and the way of Farfetch, an industry leader with more strategic brand relationships and an unparalleled consumer proposition. Our marketplace business is also healthier than in 2019. Like many luxury groups, we have taken the past two years as an opportunity to increasingly shift our business towards full-price sales, away from the brand.

“Of the top 10 brands in our market, five now follow a full price strategy,” he said, adding, “Our own brownsfashion.com has eliminated all markdown sales for over a year and is now a 100% full-price destination In 2022, we expect to continue to drive market share by capturing digital platforms, GMV growth while executing our strategy to continue to drive a much larger full price mix important towards an even healthier activity.

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