In after-hours trading on Thursday, Farfetch Limited (NYSE: FTCH) showed a significant increase of 17.97%, reaching $5.12. During the previous trading session, FTCH stock experienced a gain of 6.37% and closed at $4.34. The release of Farfetch’s financial results contributed to the rise in the stock price of this prominent global luxury fashion platform.
Is FTCH Performing Well?
Farfetch (FTCH) recently released its financial results for the first quarter ended March 31, 2023. The company witnessed significant revenue growth, driven by its digital and brand platforms, as well as strategic partnerships.
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Revenue Growth And Segment Performance
Farfetch reported a year-over-year revenue increase of 8.1% in Q1 2023, reaching $556.4 million. The growth was fueled by a 6.5% increase in Digital Platform Revenue, a 13.9% increase in Brand Platform Revenue, and a 9.6% increase in In-Store Revenue. Excluding the impact of foreign exchange rates, revenue would have increased by 11.8%. This consistent revenue growth demonstrates Farfetch’s ability to capitalize on the growing online luxury retail market.
Cost Of Revenue And Gross Profit Margin
Cost of revenue increased by 11.1% in Q1 2023, primarily driven by increases in Digital Platform Services and Brand Platform cost of revenue. However, Farfetch managed to maintain a gross profit increase of 4.4% to $240.6 million. The Gross Profit Margin decreased by 160 basis points to 43.2% due to a decline in Digital Platform Gross Profit Margin. Nonetheless, the increases in Brand Platform and In-Store Gross Profit Margins partially offset this decline.
Selling, General, And Administrative Expenses
Selling, general, and administrative expenses rose by 7.0% year-over-year, totaling $418.8 million in Q1 2023. While this increase indicates continued investment in growth initiatives, investors should monitor the company’s ability to manage expenses effectively as it scales its operations.
Strategic Partnerships And Expansion
Farfetch’s partnership with Reebok, through its owner Authentic Brands Group, presents significant growth opportunities. This collaboration allows Farfetch to operate Reebok’s business in Europe, expand luxury collaboration offerings globally, and replatform European e-commerce sites. Such strategic partnerships can enhance Farfetch’s brand portfolio and drive customer acquisition and retention.
Profitability And Adjusted EBITDA
Farfetch experienced a significant year-over-year decline in profit after tax, resulting in a loss of $174.3 million in Q1 2023. This decrease was primarily due to gains/(losses) on items held at fair value and remeasurements, which decreased by $915.1 million. However, adjusted EBITDA improved by 2.9% to a loss of $34.7 million, with an improvement of 90 basis points in adjusted EBITDA margin. This improvement was primarily attributed to declines in demand generation and technology expenses as a percentage of Adjusted Revenue.
