Farfetch Limited drops on soft results, lowered guidance

By Senad Karaahmetovic

Shares of Farfetch (NYSE:) are down over 8% pre-market after the online fashion retailer reported a bigger-than-expected loss for its third quarter and revised guidance lower.

Farfetch a loss per share of $0.24 on revenue of $593.4 million. Analysts were expecting a loss per share of $0.21 on revenue of $598.26M. Gross merchandise value (GMV) fell 5% year-over-year to below $1 billion.

Farfetch also revised lower its full-year outlook and now looks for digital platform GMV to decline -5% to -7% from flat to +5% growth. Moreover, the company is now expecting to post an adjusted EBITDA margin loss of -3% to -5%, down from the prior forecast of 0%.

“Through it all, our focus has remained on our mission to be the global platform for luxury while also taking the opportunity to fundamentally re-structure our organization and streamline our cost base,” the company said.

“As a result, Farfetch is further positioned to seize the significant announced milestones and future opportunities ahead, and emerge from this period as an even stronger business set to deliver profitability and free cash flow.”

Wells Fargo analysts said FTCH delivered a “squishy 3Q print as macro factor continue to drag on GMV and margins.” Still, they see a “favorable setup into Analyst Day as more color on GMV/EBITDA/FCF inflection in 2023 unveiled, bulls can start to dig in here.”

“While the NT numbers have admittedly been somewhat uninspiring, we take a longer-term view on the stock at these levels,” the analysts added in a note.

For Farfetch, 2023 can’t come fast enough, BTIG analysts said. They cut the price target to $13 from $16 to reflect a lower target marketplace gross profit multiple.

“While there were bright spots (order contribution margin, take rate), overall it was a disappointing quarter, especially after the luxury brands themselves reported relatively strong quarters. As we think about 2023, promotionality was quickly stamped out by the luxury brands in 2019/2020, and we expect the same thing to happen next year. Thus, while we realize 4Q22/1Q23 will be difficult and execution by FTCH has become choppy, we nonetheless expect 2023 to have more tailwinds than headwinds, barring a deep U.S. recession,” they wrote.

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