Online luxury fashion player Farfetch has started 2021 with sales increasing in the high double digits during the first quarter, and China expected to make an even greater mark following the company’s launch on Alibaba Group’s Tmall Luxury Pavilion in March. Alibaba took a stake in Farfetch last year before the deal.
Revenue at the company rose by 46 percent year-on-year to $485 million in Q1, which was “a better than expected acceleration,” according to Farfetch’s founder and CEO José Neves. The company’s three platforms — digital, brand, and in-store — all made gross profit contributions totaling $221 million, of which digital generated $156 million.
Neves said in a statement: “Our brand partnerships have never been stronger, and our customer and brand building initiatives are resonating well. I am very enthused by the consumer reaction to our recent launch on Tmall and the momentum building behind our Luxury New Retail vision as we see it being adopted by partners around the world.”
CFO Elliot Jordan added that he was “more optimistic about our growth expectations for the year in light of a more favorable consumer backdrop.”
In an investor call on Thursday evening, Neves told analysts: “The momentum in our business is a reflection of the paradigm shift we have helped drive over the past year where we’ve seen accelerated online adoption by luxury consumers. We expect this will be sustained.”
In China, Farfetch grew faster than in the company’s largest market (the US) and the overall market in Q1. Neves noted that, unlike many other parts of the world last year, Chinese consumers had the option to shop in brick-and-mortar stores since Spring of 2020, yet Farfetch has maintained what he called “outsize growth.”
The company’s storefront on Tmall’s Luxury Pavilion has extended the reach of its online portfolio of 3,000 brands to almost 800 million consumers in China. This expansion complements Farfetch’s existing presence in other channels such as WeChat and its own app.
Of those brands, almost 90 percent were not previously available on Tmall, and they are now associated with Farfetch. Tmall customers have become interested in niche labels, with eight out of the top-10 bestselling brands ranking much lower within Farfetch’s marketplace. “This is validation that our proposition is resonating with the public,” claimed Neves.
The Tmall storefront is also opening a wider demographic, which is more female and spread across Tier-1, Tier-2, and Tier-3 cities versus Farfetch’s core customers on its China app. Neves said that initial Tmall sales have been “multiples of comparables from our launch on JD.”
In other areas of the business, Farfetch made progress as follows:
- Opened a relocated Browns boutique in London equipped with the latest version of its ‘connected retail’ technology, offering visitors a personalized, interactive experience
- Expanded e-concession integrations for Harrods with the addition of Zegna and Brunello Cucinelli
- Implemented a connected retail solution in a Chanel boutique in Monaco
- Signed global department store Printemps to design the in-store technology and a connected retail experience for a planned 300,000 square-foot flagship in Doha, Qatar
- Appointed by the Cidade Matarazzo complex — now in development in São Paulo, Brazil — to develop a connected retail solution across the complex’s entire 300,000 square foot retail village
Neves concluded: “As a digital enabler of the global luxury industry, I am more confident than ever in our position to go after the significant growth potential we see. That is a nearly $300 billion opportunity which we remain laser-focused on.”
Farfetch, which floated in September 2018, saw its stock surf the pandemic wave well from April 2020. It peaked at $73 in mid-February but has fallen since then and closed on Thursday at $37.24. The decline this year to date has been 42 percent.