Farfetch has reported strong sales growth in a year when luxury fashion shoppers turned online to buy during Covid-19 lockdowns. It reported its first top-level profit, but at the bottom line its losses widened to $3.3bn (£2.4bn), as it issued debt in exchange for investment.
The luxury fashion retailer and marketplace, ranked Leading in RXUK Top500 research, has reported revenue of $1.7bn (£1.22bn) for 2020 – 64% up on the same time last year. During the year, more than 1,350 sellers on its marketplace sold goods from more than 3,500 brands worth $2.1bn (£1.51bn) in gross merchandise value. Of that, 84% was sold by third-party sellers. Its strongest categories included watches and jewellery.
At the bottom line it reported a pre-tax loss of $3.3bn (£2.4bn), almost tenfold the loss of $373.7m (£268.24m) it made a year earlier – related to share price performance in relation to the debt notes it issues in exchange for working capital. In 2020, it issued $600m (£430.75m) in convertible notes to investors Alibaba and Richemont, who put $1.15bn (£0.82bn) into the company in a partnership that aims to get brands up to speed selling online and in China. Farfetch ended the year with $1.6bn (£1.15bn) in cash.
In the fourth quarter of the year alone, the retailer reported revenue of $540m (£387.73) and a pre-tax loss of $2.3bn (£1.65bn), including a $2.1bn (£1.51bn) writedown, partly as resulting from its use of convertible notes. But at the top-level profits level it reported earnings before interest, tax and asset write downs of $10m (£7.18m).
Farfetch’s own strategy now is to be a digital enabler, connecting retailers, brands and shoppers. In 2020, it added harrods.com, off—-white.com and palmangels.com to the websites it runs for third-party brands using its own technology.
José Neves, founder, chairman and chief executive of Farfetch, says: “2020 put the Farfetch platform to the test, but thanks to our robust capabilities, resilient operations and utmost perseverance from our more than 5,000 Farfetchers, we rose to the challenge and enabled our nearly 1,400 Marketplace sellers and Farfetch Platform Solutions clients to continually serve millions of luxury consumers across the globe. We cemented our leadership as the largest global online destination for luxury fashion, accelerated our Chapter 2 initiatives with strategic partnerships advancing our position to be the global platform for the luxury industry, and demonstrated the scale and attractiveness of our business model as we achieved the key milestone of adjusted EBITDA profitability in the fourth quarter.
“As we enter 2021, I am more energised than ever by the prospects of leveraging our incredible achievements to date and our unique platform capabilities to go after the significant growth opportunities we see in our vision to be a digital enabler connecting the creators, curators and consumers of the global luxury industry, both online and offline – a nearly $300 billion opportunity we remain laser-focused on and plan to continue investing behind to deliver significant value over the long-term.”
During the year Farfetch improved its customer experience by improving push notifications and live customer service on its app in markets including China, and expanded the use of virtual try-on technology to luxury watches - one category where sales grew particularly quickly. It also piloted style advice, offered to its UK and US gold and platinum customers in partnership with Wishi.
It took its store of the future technology to Chanel boutiques in Paris, and soft launched its storefront on Tmall’s Luxury Pavilion. It also signed up for a new third-party warehouse in the Netherlands, expected to up and running in April. It also said that the effect of Brexit may affect its service levels or the cost of its sales, and that the expansion of ecommerce may in itself add costs.
Farfetch sells online and through its own stores in London, the US and Japan.