Farfetch's (NYSE:FTCH) Q1 Sales Top Estimates, Stock Jumps 18.4%

Kayode Omotosho /
2023/05/18 4:22 pm EDT

Online luxury marketplace Farfetch (NYSE: FTCH) beat analyst expectations in Q1 FY2023 quarter, with revenue up 8.08% year on year to $556.4 million. Farfetch made a GAAP loss of $174.3 million, down on its profit of $728.8 million, in the same quarter last year.

Is now the time to buy Farfetch? Access our full analysis of the earnings results here, it's free.

Farfetch (FTCH) Q1 FY2023 Highlights:

  • Revenue: $556.4 million vs analyst estimates of $515.4 million (7.96% beat)
  • EPS (non-GAAP): -$0.16 vs analyst estimates of -$0.29
  • Free cash flow was negative $162.7 million, compared to negative free cash flow of $19.4 million in previous quarter
  • Gross Margin (GAAP): 89.1%, up from 44.8% same quarter last year
  • Trailing 12 Months Active Consumers: 3.99 million, up 170 thousand year on year

José Neves, Farfetch Founder, Chairman and CEO, said: “I am delighted to report that Farfetch was back to growth in first quarter 2023. Our first quarter results represent the first step towards achieving our plan for 2023, our Year of Execution, and demonstrate our strong execution in the face of continued macro headwinds. Our sequential improvement in GMV growth in the US and China, our two largest markets, as well as in orders across the Farfetch Marketplace, indicate the strength and resilience of our core business. This, on top of our recent launches of Ferragamo and Reebok, with Neiman Marcus Group on track for the second half of the year, and progress we are making on our profitability and cash flow initiatives, confirm we remain on track to deliver on our plan for 2023.

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 strong, averaging 29.5% annually. This quarter, Farfetch beat analyst estimates but reported a mediocre 8.08% year on year revenue growth.

Farfetch Total Revenue

Ahead of the earnings results the analysts covering the company were estimating sales to grow 21.7% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Usage Growth

As a online marketplace, Farfetch generates revenue growth both by growing the number of buyers on the platform and the average buyer size in dollars.

Over the last two years the number of Farfetch's active buyers, a key usage metric for the company, grew 17.1% annually to 3.99 million. This is a solid growth for a consumer internet company.

Farfetch Trailing 12 Months Active Consumers

In Q1 the company added 170 thousand active buyers, translating to a 4.45% growth year on year.

Key Takeaways from Farfetch's Q1 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 $1.61 billion and more than $485.9 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by how strongly Farfetch outperformed analysts’ revenue and EPS expectations this quarter. Additionally, gross merchandise value or GMV also beat by nearly 4%. Additionally, GMV guidance for the full year was nearly 3% ahead of Consensus. While adjusted EBITDA in the quarter was relatively in line, full year guidance was ahead. Overall, this quarter's results seemed quite positive and shareholders can feel optimistic, especially after last quarter showed a worrisome year on year decline in revenue but this quarter broke that trend, showing positive growth. Management capped the solid quarter with comments about a commitment to "a return to profitability and positive free cash flow." The company is up 20.2% on the results and currently trades at $5.23 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.