Online luxury marketplace Farfetch (NYSE: FTCH) reported results ahead of analyst expectations in the Q2 FY2022 quarter, with revenue up 10.7% year on year to $579.3 million. Farfetch made a GAAP profit of $67.6 million, down on its profit of $87.9 million, in the same quarter last year.
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Farfetch (FTCH) Q2 FY2022 Highlights:
- Revenue: $579.3 million vs analyst estimates of $566.5 million (2.26% beat)
- EPS (non-GAAP): -$0.21 vs analyst estimates of -$0.25
- Free cash flow was negative $67 million, compared to negative free cash flow of $341.6 million in previous quarter
- Gross Margin (GAAP): 46.2%, up from 43.9% same quarter last year
- Trailing 12 Months Active Consumers: 3.84 million, up 450 thousand year on year
José Neves, Farfetch Founder, Chairman and CEO, said: "At Farfetch our mission is to be THE Global Platform for Luxury. This week we celebrated a major step towards that mission, with a transformational deal advancing our Luxury New Retail (LNR) partnership with Richemont.
Inspired by the idea of allowing anyone to buy clothes from landmark boutiques of cities like Paris or Milan without having to leave their couch, Farfetch (NYSE: FTCH) is a global marketplace for luxury fashion, connecting boutiques, brands and consumers.
Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission paying sellers, generating flywheel scale effects which feed back into further customer acquisition.
Farfetch's revenue growth over the last three years has been exceptional, averaging 52.1% annually. Initially, the pandemic had a positive impact on Farfetch's revenue growth, but it seems that the growth has been pulled forward and has subsequently normalized.
This quarter, Farfetch beat analyst estimates but reported an mediocre 10.7% year on year revenue growth.
Ahead of the earnings results the analysts covering the company were estimating sales to grow 10% over the next twelve months.
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As a online marketplace, Farfetch generates revenue growth both by growing the number of buyers using the platform and how much each of those buyers spends.
Over the last two years the number of Farfetch's active buyers, a key usage metric for the company, grew 32.6% annually to 3.84 million users. This is among the fastest growth of any consumer internet company, indicating that users are excited about the offering.
In Q2 the company added 450 thousand active buyers, translating to a 13.2% growth year on year.
Key Takeaways from Farfetch's Q2 Results
Since it has still been burning cash over the last twelve months it is worth keeping an eye on Farfetch’s balance sheet, but we note that with a market capitalization of $3.62 billion and more than $675.1 million in cash, the company has the capacity to continue to prioritise growth over profitability.
It was great to see that Farfetch’s user base is growing. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, revenue growth is overall a bit slower these days. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is up 6.4% on the results and currently trades at $10.14 per share.
Should you invest in Farfetch right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
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The author has no position in any of the stocks mentioned.