Farfetch (NYSE:FTCH) Misses Q3 Sales Targets, Stock Drops

Adam Hejl /
2022/11/17 4:15 pm EST

Online luxury marketplace Farfetch (NYSE: FTCH) fell short of analyst expectations in Q3 FY2022 quarter, with revenue up 1.85% year on year to $593.3 million. Farfetch made a GAAP loss of $274.9 million, down on its profit of $769.1 million, in the same quarter last year.

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Farfetch (FTCH) Q3 FY2022 Highlights:

  • Revenue: $593.3 million vs analyst estimates of $596.5 million (0.53% miss)
  • EPS (non-GAAP): -$0.24 vs analyst estimates of -$0.20
  • Free cash flow was negative $130.6 million, compared to negative free cash flow of $67 million in previous quarter
  • Trailing 12 Months Active Consumers: 3.9 million, up 310 thousand year on year

José Neves, Farfetch Founder, Chairman and CEO, said: “Luxury is an incredible industry that has proven to be resilient, and Farfetch’s global platform for luxury is on pace to broadly double its size over three years, despite navigating an unprecedented series of global events.”

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.

Sales Growth

Farfetch's revenue growth over the last three years has been impressive, averaging 44.8% annually. 

Farfetch Total Revenue

This quarter, Farfetch reported a rather lacklustre 1.85% year on year revenue growth, falling short of Wall St expectations.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 13.5% over the next twelve months.

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Usage Growth

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 28% annually to 3.9 million users. This is among the fastest growth of any consumer internet company, indicating that users are excited about the offering.

Farfetch Trailing 12 Months Active Consumers

In Q3 the company added 310 thousand active buyers, translating to a 8.62% growth year on year.

Key Takeaways from Farfetch's Q3 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 $3.55 billion and more than $487.3 million in cash, the company has the capacity to continue to prioritise growth over profitability.

It was good to see that Farfetch’s added new users. That feature of these results really stood out as a positive. On the other hand, it was less good to see that the revenue growth was quite weak and it missed analysts' revenue expectations. Overall, this quarter's results could have been better. The company is down 9.29% on the results and currently trades at $8.29 per share.

Farfetch may have had a tough quarter, but does that actually create an opportunity to invest 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.