Farfetch Limited

Farfetch reported Q2 GMV of $1 billion, up 1% reported and constant currency. Revenue declined 1% year over year, gross profit declined 9%, and adjusted EBITDA was negative $31 million, which was $4 million better than Q1. Digital platform GMV increased 7%, digital platform services revenue increased 10%, and digital platform order contribution margin was 31.2%. Cash and cash equivalents were $454 million at quarter end, and management said cash use improved by $316 million versus Q2. For 2023, the company now expects 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%, adjusted EBITDA margin up to 1%, G&A and technology costs of circa $800 million, digital platform order contribution margin of 33% to 35%, and brand platform gross margin of 46% to 48%. Management also expects positive free cash flow and year-end cash and cash equivalents of over $800 million, aided by approximately $180 million of net proceeds from expanding the term loan B facility.

Jose Neves framed the quarter as evidence that Farfetch is executing a major pivot toward profitability and cash generation without abandoning its long-term luxury-platform strategy. He emphasized that the company’s “North Star” remains intact, pointed to structural cost cuts, and said the business is still on track for 2025 targets of $10 billion GMV and about $400 million in adjusted EBITDA. His tone was confident but more cautious on near-term growth, especially in the U.S. and China, which he described as weaker than expected after reopening and amid broad luxury industry softness.

Elliot Jordan focused on the operating leverage in the quarter and the revised outlook. He highlighted 7% lower total G&A and technology spend, a $14 million year-over-year reduction, and positive free cash flow supported by stronger working capital; he also noted $454 million in cash and cash equivalents at quarter end. On the outlook, he tied the higher second-half liquidity expectation to improved profitability and working capital, said the company expects over $800 million in cash and cash equivalents at year-end, and referenced about $180 million of expected net proceeds from expanding the term loan B facility. He also said roughly $50 million of revenue at about a 50% gross margin shifted from Q2 into H2 because of delayed brand platform shipments.

Analysts pressed management on whether the $150 million cost savings were incremental and whether weaker U.S. and China trends were structural or macro-driven. Jose said the $150 million reduction was versus prior guidance and that the U.S. and China softness was largely macro-related, not Farfetch-specific, while also noting reduced demand generation spend in both markets. Another question focused on whether the second-half outlook implied meaningful market share gains; Jose argued Farfetch has historically gained share, citing 20% CAGR in NGG from 2018 to 2022 and 40% supply growth in Q2, and said the marketplace can scale quickly when demand improves. Questions also covered beauty, Off-White, Reebok, and the Richemont/YNAP deal; Jose confirmed beauty is being discontinued on the marketplace, said Off-White and Palm Angels demand remains strong, described Reebok as still in transition but promising, and said the YNAP share count and dilution mechanics are fixed and unaffected by the stock price.