Farfetch Limited

Q2 GMV was $1 billion, up 1% reported and constant currency. Revenue declined 1% year over year and gross profit declined 9%. Adjusted EBITDA was minus $31 million, $4 million better than Q1. Digital platform GMV grew 7%, digital platform services revenue grew 10%, and digital platform order contribution margin was 31.2%. Brand platform GMV declined 41% to $63 million, and management said about $50 million in revenue at roughly a 50% gross margin shifted from Q2 into the second half. Full-year 2023 guidance now calls for GMV of approximately $4.4 billion, digital platform GMV of approximately $3.85 billion, brand platform GMV of approximately $450 million, revenue growth of 8% to 10%, G&A and technology costs of about $800 million, digital platform order contribution margin of 33% to 35%, brand platform gross margin of 46% to 48%, positive free cash flow, and up to 1% adjusted EBITDA margin. Management also said it expects year-end cash and cash equivalents of over $800 million, helped by expected net proceeds of approximately $180 million from expanding its term loan B facility.

Jose Neves framed the quarter as evidence that Farfetch’s long-term luxury platform strategy remains intact even as the company prioritizes profitability and cash generation. He repeatedly emphasized “decisive action” on costs, saying the business has reset its fixed-cost base and is still on track for the company’s 2025 goals of $10 billion GMV, about $400 million in adjusted EBITDA, and strong free cash flow. His tone was confident and defiant: he described the North Star as unchanged, but said the company is being more prudent because of macro weakness in the U.S. and China.

Elliot Jordan focused on the numbers behind the quarter and the updated outlook. He said digital platform GMV rose 7%, services revenue rose 10%, and order contribution margin stayed strong at 31.2%, while G&A and technology spend improved 7% year over year to $14 million lower than last year and $15 million lower than Q1. He highlighted positive free cash flow, a $316 million improvement in cash use versus Q2, and ending cash and cash equivalents of $454 million. For the rest of 2023, he guided to GMV of about $4.4 billion, revenue growth of 8% to 10%, G&A and technology costs of about $800 million, brand platform gross margin of 46% to 48%, digital platform order contribution margin of 33% to 35%, positive free cash flow, and year-end cash above $800 million, including expected net proceeds of about $180 million from the TLB expansion.

Analysts pressed management on whether the $150 million cost reduction was incremental, on the softness in the U.S. and China, and on whether the market weakness there was structural or purely macro-driven. Neves said the $150 million cut was versus prior guidance, not the entirety of prior reductions, and argued the U.S. and China weakness is industry-wide rather than Farfetch-specific, while also saying the company is reducing demand-generation spend in those regions. Other questions focused on whether second-half guidance implied share gains, the beauty wind-down, inventory on the brand platform, and the YNAP/Richemont transaction; management said beauty was discontinued to prioritize higher-return categories, inventory should normalize as delayed shipments clear and Reebok ramps, and the YNAP dilution/share-count mechanics are fixed and unaffected by the stock price.