Q1 2020 Earnings Call
[music].
Good afternoon. My name is just see and I'll be your conference on Thursday.
At this time I'll like to welcome everyone to the Farfetched first quarter 2020 results conference call all lines on plates on mute to prevent any background noise.
After the speaker's remarks, there'll be a question answer session. If you like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you like to withdraw your question press the pound or hash key. Thank you I'd now like to turn the call over to Alice Rider VP of Investor Relations. This writer you may begin your conference.
Hello, and welcome to Farfetch is first quarter 2020 conference call.
Joining me today to discuss our results are Josefina, that's our founder co chair and Chief Executive Officer, and Elliot Jordan, Our Chief Financial Officer.
Before we begin we would like to remind you that our discussion today will include forward looking statement.
Actual results could differ materially from those indicated in the forward looking statements and forward looking statements made today speak only to our expectations as of today.
We undertake no obligation to publicly update or revise them.
Or discussion that some of the important risk factors that could cause actual results to differ please see the risk factor section of our form 20-F filed with the FCC on March 11 2020.
And in exhibit 99.22, our form 6K filed with the FTC on April 27 2020.
In addition, we will refer to certain financial measures not recorded in accordance with IR for us on this call.
You can find reconciliations of these non IRS financial measures to the IRS financial measures in our earnings press release in the slide presentation, both of which are available on our website at park such investors Dot com.
And now I'd like to turn the call a bird teacher thing.
Thank you Alex and thank you Oh, well driving his state.
In the short period since our last earnings call, we've seen the world become in Gulf budgets Global pandemic.
And I hope you and your loved ones are all healthy and well I'm staying safe.
Our thoughts out with everyone, who has been impacted by Cobiz 19, and we extend our heartfelt appreciation to the frontline healthcare workers and so its responses.
All the employees, who are providing essential services.
And in many other workers and scientists, let helping us Oh man there should be difficult situation.
To see all 10 of these crazy out.
Now, let's talk priority has been the health.
Well being of our satisfaction.
Our boutique and blend pads and all the consumers.
Where do you see in mind, we took proactive steps in line with problem of guidelines, including temporarily clothing.
Our retail location and most of our offices.
On temporarily closing or reducing capacity in our production studio.
We implement safety measuring and they show social distancing, while maintaining operations.
Most of already impacted personnel has been able to safely work from home.
We have continues to compensate all our employees.
Regardless of closures or reduced hours without availing ourselves of the government loans also looks schemes.
Throughout this period I'll see if he can change we have been laser focused on adapting our operations to continue serving our community of luxury sat with unconcealed moves and I'm very pleased to report we had a strong Q1.
We saw positive G.M.D. and digital platform GMB growth each long all of the quota.
To Delever and overall growth of fall defeats the sand and 19% respectively.
On the call some currency Basie Q1, do you still classroom G.M. he.
20%.
And we believe we continue to capture market share of the online luxury fashion industry.
And extended our lead as the largest global online destination for infusion luxury fashion.
We also believe a strong performance on the bottom line.
Q1, adjusted EBITDA loss of $22 million.
Significantly outperformed our guidance for an adjusted EBITDA loss of $30 million to $35 million.
As we continue to maintain our focus on achieving adjusted EBITDA profitability in 2021.
And scaled our operating costs.
In light of Copel get 19, we also initiated some cost saving actions in Q1, and we plan to continue to looking for opportunities.
Two treme discretionary costs and prioritize project focused on delivering either growth all cost savings in the near term.
I was strong operational and financial performance against the backdrop of the challenges presented by the can dynamic.
Highlights the resilience of our business model.
Which is underpinned by three key aspect.
Test unlike most other business using the luxury fashion industry, our revenues primarily generated by digital channels.
We should enable us to reach a global consumer base across the 190 Countrys msos.
He has proven particularly powerful in the current empower them and.
As we have been able to adjust our demand generation assets in real time.
In response to fluctuations evolving situation.
For example, where do we saw a slowdown in late two one customer activity in our Latin American seen Europe and North America.
We pulled back our demand generation efforts in those regions.
On the out of hand in the China region.
They are locked on measure that began in January we increased our marketing efforts as customer interest began to accelerate stock in February.
Which resulted in faster growth in this region by the end of the quota Dan for all of 29 pm.
And second advantage of our model, it's I wouldnt she'll diversified supply that work.
More than 1002 kinds of tightness, representing thousands of stockpiling across 50 plus countries.
Well, we have seen as many as 350 different salads go offline.
Due to loss on managers at some point seems news match.
We have still being able to offer our marketplace consumers.
Broad range of province.
As 85% of our main in season offerings are available from multiple Sal is leading our supplier network.
In fact total stock units grew sequentially and we continue to offer our consumers a product selection for more than 3004 kinds of brands in Q1.
Finally as in the at scale business, we are able to leverage our longstanding relationship with major global logistics providers.
Well the franchisees have logistics providers I rightly prioritizing essential shipments.
Our operations teams have been working closely with our partners.
To access the remaining capacity swisher, our ability to believer customer are those around the world.
As a result, while we have encountered some minor disruptions they have not materially impacted our operational performance.
Our unique business model has enabled us to remain operational through out the country's 19 crises.
Which had been 10 allows our tens of millions of mostly marketplace easy to.
To continue to Shaw for beautifully crafted fashion items.
And the enables our suppliers to continue selling their curated collection.
During a period when most have had to shutter their physical retail businesses.
To be fans last month, we also launched our hashtag subpar boutiques initiative.
Aimed at bringing our draw the community together in further support of our boutique tiredness.
Most of which as small businesses.
Online is currently a vital lifeline for them.
We put our wage and voice behind the movement by launching its social initiatives.
On highlighted these as the main confident on our marketplace.
And what we found is that by standing up for an important cogs in an authentic way. We also drew a strongly positive response from our customers, who also care about our boutiques and want to help small business he's managed through the challenging periods.
Looking towards the medium to long term.
I am more confident than ever.
Our prospects F D global platform for the luxury fashion industry.
Over the course of the past decades, and economic downturns, the luxury fashion industry has proven to be extremely resilient.
We expect that to remain true.
But one thing that has become abbey them over the past week is that the world will not go back to the same normal as we knew we pre coffees 19.
I believe we have six key differentiating advantages.
Which position us to emerge from the current situation in an even stronger position.
One.
The resilience of our business model.
Which has enabled us to continue serving the industry and our consumers throughout different dynamic with minimal disruption.
To our market leading digital platform.
With shops on Department stores remaining lastly, close today unlikely to happen reduced footprint on track of going forward.
We expect online luxury penetration will accelerate.
As physical store shoppers seek to make even more of their luxury purchases through digital channels.
He minimally vein is now expecting online to grow from 12% 2019.
To 30% of the personal electronic goods markets. My 2025, that's up from 25% previously.
We continue to make market share gains and strengthening our leadership position within the views the landscape, we the likes of rankings across the various online luxury destinations demonstrating that our competitive leave has been widening.
Three our expertise and localized operations in China and other key markets.
Industry sources indicate that Chinese consumers represented 35%.
All of luxury consumption in 2019.
All of which approximately 70% was made while traveling.
These amounts to approximately $70 billion of personal luxury goods.
That's changed by Chinese nationals, while traveling outside mainland China.
Demand, which we'd all else being equal will now needs to be repatriated.
As international travel is expected to decline up to 80% in Twentytwenty.
[noise], we believe the same scenario applies to other major luxury goods markets.
Where we also have localize operations.
Such as the Middle East, Brazil, Russia.
Hi, it's actually is ideally positioned to feel diskette by enabling luxury consumers to continue shopping a global supply without needing to travel.
For.
Our unique eaken fashion model.
Even prior to confuse 19 brands leased it digital transformation and by the top priorities.
Along with a transition away from wolsfeld distribution channels.
In the current environment, we believe there is even more urgency behind these initiatives.
Which favors five fad she's direct to consumer approach.
Hi.
Our enterprise solutions business.
Such platform solutions, our S. P S.
We expect this path of our business to accelerate.
As brands at Department stores focused more closely on that do you still strategies.
A perfect example of this inherits a multibillion dollar business and perhaps the most iconic luxury department store in the world.
Within one year, we re Platformed every call this business.
In hindsight, the Replatform what impact that we time.
As a London Star was temporarily closed one month later due to Cobiz 19 locked on measures.
By leveraging the Fastmatch platform capabilities.
Harrods Dot com not only managed to continue to serve customers around the world. We very high service levels two out of the ongoing locked down I'll get slender department store.
It has been trading well above expectations since launch.
He has not gone unnoticed.
And in light of the current environment.
Which is heightening the urgency for luxury business seems to implement digital strategies.
We have seen and acceleration off conversations with either leaving the patent styles and Brent.
Watch this space.
And finally, our out maintain retail strategy.
We believe that a key structural change that will result from the go he's 19 crazy.
We'll be the need to digitize brick and mortar luxury when customers can safely we tend to retail styles.
We expect it will be Paramount in the Neal normal for physical retail is to continue to offer an enjoyable and personalized shopping experience.
And now if we implement new approaches to remain financially viable in the world where sales per square foods could otherwise drastically decline.
We have been investing behind these including our star of the future solution launch Weve Chanel last June.
We have been adapting the start of the future product and we're pleased to see many of the functionalities developed for Chanel free copies 19.
I also have the potential to be incredibly powerful.
If I recall, these 19 world and beyond.
We believe these digitization of physical retail was a distant innovation for many luxury brands and retailers.
That's the May now be promoted from nice to have.
Two must have stated.
Do you see the vision, we have believed in for many years.
And one that we are uniquely position.
Developed for the global luxury industry.
Looking back over the past few months.
We can clearly see that to the investments we've made over the past 12 years.
Build the global platform for the luxury fashion industry are paying off.
And position us well for the future.
I am optimistic that together with our boutique brands and Department store partners.
We will emerge from the current situation even stronger.
And with that I'll turn it over a 12 year to provide a financial epic.
Thank you Gerry Fay and Hello, everyone.
I Trust, you were all well and keeping on top of your physical and mental health during these challenging times.
I'm very pleased to be sharing with you our financial results for Q1, three between say, which as far as I stated underlines the strength of our business model.
Specifically to run three Gtwenty GMB was $611 million up 46% year on year and adjusted revenue was $301 million doubling from Q1 last year.
On the bottom line, we delivered an adjusted EBITDA loss of $22 million and 8 million dollar improvement competed with the prior year period.
And adjusted EBITDA margin of minus 7% against minus 21, focusing in Q1 29 team.
And our Q1 2020 operating loss after tax was $79 million.
We have also strengthened our financial position with two financings you today.
We closed the quarter with $422 million of cash and cash equivalents and this balance was subsequently increased bother me proceeds of the 400 million dollar financing that was completed last month.
Let me take you through some highlights of Q1 by business segment.
First in the digital platform.
Jim the grew by 19% year on year or 20% in constant currency to $495 million.
86% of this GMB is from third parties fellows using the platform bar, the marketplaces or fixed platform solutions at an average take rate of 29.9%.
The remaining GMB use from our first party business of which two pissing is first coffee original brands developed by new jobs, and so direct to consumers on the digital platform.
Digital platform services revenue grew 31% year on year to $195 million.
This performance across Q1 reflects a period pretty coated nine team and the period off the various levels of markdowns were put into place across our markets.
I'm pleased to report that the digital platform delivered growth in each month of the quarter.
Overall traffic grew 41% year on year, reflecting the acceleration of the shift of luxury online.
GMB from new customers grew faster than GMB from existing customers.
For the first time in three years.
Recaptured a significant number of new customers during this period.
This drive an increase an active customers of 27% year on year across the sockets marketplace.
And the China region grew ahead of the platform average across the quarter ends grew faster over the last two months of Q1, then this region the across all of 29 team as a whole.
We now plan to leverage this large new customer cohorts to drive growth moving forward.
In terms of margin to one order contribution margin was stable quarter on quarter at 32%.
This reflects the following factors.
First continued efficiencies across the marketplace in terms about fulfillment costs and the lower return right year on year driving up underlying gross margins.
Secondly, the growth of first party original transactions with higher product margins and food stable year on year demand generation expenditure as a percentage of GMB.
Reflecting a lower cost per visit and lower customer acquisition costs, despite the higher growth and your customers.
These factors were offset by lower.
Lower first party gross margins were in light of the uncertain trading environment. We have taken the decision to provide for im clear out some stock lines, where realizable values are likely to come under pressure over the coming months.
And lower I believe.
Partially driven by mix towards lower priced categories during lockdown.
Pricing initiatives by some sellers.
End of a higher mix of new customers as first time orders tend to be with smaller baskets.
The brand platform delivered $107 million of GMB aims connected wholesale revenue and contributed $52 million of gross profit at a margin of 49%.
This performance was once again underpinned by strong demand for off wise and comedy shows.
For the third consecutive quarter of White was the number one hottest brand. According to the Q1 Twentytwenty list index.
And finally, our in store segment delivered $9 million of GMB.
Sequentially down Jude and path to covert nine thing related to store closures.
We also continue to focus on our path to profitability at the group level.
Delivering strong operating leverage and efficiencies across the cost base.
The operating cost of our technology platform and our Gionee costs totaled 46% of adjusted revenue compared to 56% in Q1 29 thing.
Q1, depreciation and amortization was $51 million inline with Q4 29 same and out share based payment expense was $27 million.
Now looking ahead.
We believe we are well equipped to navigate the significant challenges in the coming month.
However, it is important that we continue to keep one always focused on our longer term plans and one what supply on the near term uncertainty presented by card benign thing.
In particular, we do not know how consumer sentiment will be impacted by government lockdowns and the resulting macro economic impacts.
And with that relief measures will be sufficient to boost consumer confidence in the near term.
This is continue to have an impact on demand in some about larger markets, including the U.S. and parts of Europe.
We also expect the competitive environment will intensify.
As online and offline retailers assist the current stock position and trading standards in the coming weeks.
Increased discounting and markdowns, who require our sellers to assist their competitive position on stoppage.
Which could intune lead to lower our user base and a higher cost of delivery as a percentage of GMB.
The recent news that Neiman Marcus has initiated chapter 11 proceedings as a leading indicator that pricing activity is likely to increase in the near term.
Plus refund factory shutdowns may lead to delight, all fall winter product deliveries into our seller base.
With regards to the brand platform today, we have not seen immaterial impact on our ability to deliver full wins the collections. Despite some factory closures.
However, the risk of cancellations in the near term is increase given the focus of retailers on clearing the a concept positions before taking in new season stock.
That said I'm very pleased with how we have performed throughout the cross the sorry far including pivoting, our marketing focus and revamping our consumer messaging to meet the changing landscape.
We believe that as the global platform for the luxury fashion industry profit will be a structural when a over the longer term.
Our broad offering shrunk supply of spring summer 20 products and to the exceptional customer service. Our teams are delivering continues to serve us well.
There is a lot to manage but we will continue to focus on sustainable growth.
And whilst we are not providing quantitative guidance for the second quarter.
We are on track for Q2, 20 Treaty digital platform GMP to be ahead of Q2 last year.
Additionally, we remain focused on achieving adjusted EBITDA profitability and 321.
In light of the uncertain environment and lower G.M.B. and revenue expectation. Then we had previously planned pre cobot nine team, we have revisited our cost base.
Seafaring and delaying any incremental spend no things a scene show to nearer term priorities.
We plan to continue implementing these cost saving initiatives throughout the rest of 23, and say and I will update you on the results of these efforts over the next few quarters.
On that positive note I show return you to Joe's right.
Thank you Elliot.
When I found it sounds hedge 12 years ago.
We division of building a global platform for the luxury fashion industry.
I never imagined we would be helping you seem to three navigate such unprecedented times.
Over the past few months.
As we have seen firsthand.
The positive impact of our assets.
To connect the creators curators and consumers RBC industry were so low.
And the resilience of our business model throughout.
We are even more galvanize behind our mission.
Well there are various headwinds and tailwinds.
Make no near term and predictable.
I believe five fetch will emerge structurally stronger as a platform over the medium and long term.
As we navigate described is I.
Hi, I'm extremely proud of our team.
Well rising to these and seen couple situation to ensure the continuity of our business and continue to drive our growth within the ever evolving constraints of the current environment.
I can't think other batter example of when our people have impacted our values.
I want to thank every five hatcher for that resilience and dedication to while these challenging period.
Thank you.
I'll now turn the call back to the operator Tortue one day.
Thank you at this time I'll like to remind everyone in order to ask the questions. Please press star one on your telephone keypad withdraw press the pound Keith will possibly some only took in politics Monday roster.
Your first question comes from Eric Sheridan with CBS. Your line is open.
[laughter]. Thanks, so much for taking the question and Echo in your statements Hope all is well in sequence over the long on the team there as far fetched.
Maybe a two part or when you pick up the current environment. How do you think about aligning some of the variable marketing costs in such a volatile and demand environment versus maybe some of your longer term goals and looking at customer acquisition and customer retention, while people cannot leave their homes and shop in more traditional ways offline.
And trying to capitalize on some of the pent up demand on the consumer side, so sort of marrying the shorter term variable piece, which sort of your longer term goals on customer acquisition and moving people as you said, Joe say to maybe accelerate some of the penetration curve, we see with luxury shopping online. Thanks, so much.
Hi, Eric Thank you for your question and we.
We have developed and I mean passes on.
[laughter], leading marketing tech and.
A lot of our demand generation investment is fully automated.
And also global what that means is that we are.
We were able to pickup algorithmically.
Some of the trains that he was just mentioned.
And as as I mentioned and now we have mentioned on the call we've seen.
Incredible traffic and an interest around these kinds of culture that is fashion isn't doing a lock down.
ER visits are up 45%.
New customers are up 27, saying.
And importantly that ease at constant or demand generation.
Investment as a percent theirself G.M.D. So in other words the cost of customer acquisition has gone down.
And also the cost per visit has gone down and that is a result of leaving magazine Peck.
And also as a result of staying operational with a very high level of therapies and incredible offering I'm sure I'll describe it. So so we are we are where there is opportunity and where consumer sentiment.
Allows us to do so we are capturing that extra demand.
We're also working very hard on retention retention efforts. Our tool kit is is now even more powerful and access our loyalty program is driving from a feeling does we now have almost 1.5 million active members of access.
We've seen more than 20% at least on GPV MGMT advances the control group are driven by expanding our customer frequency and I know you'll he.
And and also we are very focused on making sure that if you go out of customers easily obtain then goes from all the number ones while the number two oh the number three so so obviously each each.
Lets time, where we have to be mindful of consumer sentiment and we have to be mindful of messaging.
But in the markets, where we see an opportunity we are capturing market share and share advice.
In a in a very very very encouraging way.
Your next question comes from Louise Singlehurst with Goldman Sachs. Your line is open.
Hi, good evening, everyone. Thanks for taking my questions and two areas to me Firstly JJ, she could talk a bit about assays and new opportunities, which oh, sorry rising in the current environment. We've obviously got much stronger balance sheet capacity and I just wonder whether that's a plan to further investment in areas such as black and White is what is the co.
Marketplace strike market share, presumably there has also private brands in the industry, we can't desperately trying to meet online in the current environment and that's why they see ongoing discussions with existing partners and then secondly, I'm a question and it if I may I can just touching on the probably question really thinking about.
The Palestinians customer acquisition with the market share equation again, but really what that means so I phone contribution margin in the current environment can give us any color on of course with the learnings have last year and did that discussion around take Craig.
And if there's any kinda negotiation to not be having with some of the DTC given a bit of Oh, great holiday in the current environment. Thank you.
Oh, Thank you Lisa Thank you.
So the the.
The investments in traffic platform solutions and also start of the future I should add.
Lastly, and completed.
And we have investing behind our platform as you could see over the years and we're now leveraging that that investment of cost. We leased doesn't mean that we are not please continue to pass, but we are expecting chung leverage from our technology investments and that is.
A a line that you separated on the Pinedale. So you will be able to volume for that as we go along.
So the good news is that the very large investments that we've made in technology are paying off we now have a multitenant enterprise level global ecommerce solution that we can offer a brands as we can offer retailers and you're absolutely right. We are having very.
Exciting conversations under an acceleration of old conversation.
Brands that have seen and department stores that have seen the success.
Weve Harrods and how we were able to maintain a logo a very very high level of global therapies, including China Middle East and other key geography. So habits are overly surprises and also the either 20, a luxury brands that that you have to yes. So this has not gone unnoticed.
And we do expect advances and you know I'm I'm confident that we will have news probably next time, we speak.
The other area star of the future I think you still see an acceleration because as you know.
Sales per square food are very important K P. I saw a luxury brands the retailers.
And Ah brands, I worried and department stores that either both small cell and that's what we've seen in even in some countries that has now gone beyond locked down.
And the sales per square foot I'm, not going back for them and majority okay. This to pre cold feet numbers.
Because people want to avoid crowds because people launch contactless payments and sometimes they're not available and they want a level of personalization agility that makes shopping in a post go live world steel invaluable and and this is what we believe.
To to show now and actually you know the first thing we did we just saw the future team was gather everywhere I know say, okay. How does our product suite work, you know Cobiz World and Bosko These world.
And it was incredible because we found that many of the functionalities that we had developed yet developed pre coakley.
And our extremely powerful and are in fact being used by Chanel, even as their flagship starting to come boys closed to stay in a very personal lives elevated way servicing and keeping that dialogue between fashion that advisors and customers.
So we are we believe that these you know these utilization of brick and mortar was a nice to have in the not in our view in a but he's a view of many brands that many retailers.
We will be promoted to a must haves and I think we have the only specialist solutions specifically for electricity for the highest.
Levels of service personalization and luxury ceremony, if you want which is specifically designed for this industry. So I think we are either very very strong position those we left yes.
And we started the future leveraged the investments we've made over years.
And have you know mob brands and retailers.
You signed into platform with those products I'll, let Elliot takeover tool to answer the second part of your question. Thanks Louise.
Probably Louise good evening hope things well with you. So I think it's a great question too to think about in terms of the customer acquisition cost as market share and clearly.
The new customer mix over the first quarter shows there are customers to capture in this.
Environment, and you know a customer acquisition costs on a per customer basis.
You have to go back to 2018 to be at the low levels, we paid for new customers across the last quarter and so in a cost per visit L. paid cost to visit you even have to go back further than that to be at these sort of level. So we're seeing an opportunity to drive broader awareness for.
Capture new customers and I think.
That is the right thing to do so long answer as I was saying earlier wrong. We're confident that we can get new customers that we've acquired into second and third and fourth order stages with five fiction and that's what the team is very focused on this is a huge opportunity for us to be able to drive growth from these new.
Customers and that does of course bring into question about what does that mean from dozens of future. We are very focused on selling the same that investment with a delivery margins as you know oh among type yards for this business are around now GMP position.
Oh I'm older contribution margin of course, ultimately our EBITDA opposition and so we are very focused on older contribution is a key part of that and I think in the near term, there's a lot of push push and pull on that number obviously the I are these for the next quarter a lot.
It's a remain lower and depressed as we see intensified competition, bringing down prices in terms of not down we have seen the shift to lower priced.
Categories as well due to current saying and locked down and what that means for us is a holiday shipping costs as a percentage of GMB, because obviously the shipping costs stays the same although the Ivy drops down it could also remain in our through the pressure on the first party gross margin.
As we look into the next quarter, because the pricing initiatives and highly likely that as we try to engage these customers. We've acquired with the second and third order, we likely to offer more free shipping to engage a with a but sort of things as well those new customers.
They will be promotions of course by L. sellers I expect that doesn't necessarily mean, we will fund them a as you know weve a very much focused on.
Passing a that sounds onto L. sellers and you know that is the long term strategy for profit and so you know we are not expecting significant reductions in the were contribution in relation to that but as a side. There are a lot of other factors within their going back to what you see it around take right.
I think as you may have heard we have been offering a number of various sort of financial and see this related assistance to our boutiques. During this time.
We have for a little period of time offered a slight reduction on take right, but that is not material in the Grand scheme of things you know take right for US is all about the value that we offer to our partners and clearly right now for both boutiques.
Brands Department stores, we're offering immense value in order to be able to reach the global customer and therefore quite rightly, we will be maintaining a al position on take rates.
Historically take rates have gone up in this business.
Continues to go there around 15% there now around 30% that's because every time we renegotiate.
Without sellers on the platform. The take rates are the stayed the same or he'd nor hit up we were driving more tech right because of the value added services that are being delivered to the customer. So I think for us. It's a balance you know we're very focused on the GMB delivery the water contribution being in a good price Cobian bar.
And then ultimately the path to profitability as we continue to grow and leverage the fixed cost base.
Your next question comes from Doug Anmuth with JP Morgan Your line is open.
Great. Thanks for taking the question I too want for Elliot and I'm on for Joe say Elliott first just any more color that you can provide on the degree of slowdown in March and then perhaps also what you've seen in April and May thus far.
And just given your comments on Twoq you can we assume that quarter to date, you're seeing growth on a year over year basis, and then second for Jos a are you you talked a lot about how you helped your critical boutique partners with the support boutique initiative and then also of course just be probably.
The only way that many of them can actually sell product right now, but can you just talk about their health the health of the boutiques and also what's happening to the boutique in brand mix on the platform. During this time and do you see any changes here on the other side of the crisis. Thanks.
Hi, Doug Thanks, very much for your question. So we don't seem to breakout the quarter and some lump on stats, but what I will say is that we did see growth year on year across January February and March. So all three months of Q1, where in positive territory for the digital platform. This I mean, that's next.
Actual results in this environment as most other companies in the luxury space are not growing nothing that really does prove the strength of the business model and has been achieved as a result over all the investments. We've made today you know the investment into China robotic platform, our logistics team on marketing engine, our data range and of course L. people.
So as well as you know a decade of building relationships across the industry. I think that's served us extremely well to be able to continue to grow and build on the boutique and brand numbers in this quarter as well.
In terms of Q2, again, I'm not going to break out the quarters, but April was the heat of April 29, saying overall and on a like for like basis or within the marketplace.
But what I would say is that week by week, it's very volatile and the overall position is subject to the trading style, so they'll sellers and of course the competitive environment.
And there's a lot of uncertainty between now and the end of the quarterly as I said earlier on the consumer sentiment from call insane.
It's going to be competitive.
You know they could well be restrictions of supply of new products and to sell a basic towards the back into the quarter and also signed to Louisiana. The category mix is moving towards more leisure with lists fine fashion right. Now so may and June still remains uncertain in terms of the exact result, but we.
A theme, but yes to your point I'm confident as we stand today, given the trajectory of the business that Q2, I rule will be in growth because it got ample supply and amazing change delivering and pick a bull.
Service and the modal is proving very resilient during during this time.
Hi, Doug are picking up on the our.
Question, so around a boutique, how a and boutique and brand mix.
So we.
He gets its important to maybe take a step back and look at our.
Supply and the dynamics up supply so.
If any buying team time, a if we take a snapshot of the supply available to sell.
On the platform, we have roughly give or take $5 billion of supply obviously that has been growing consistently and sequentially.
HM.
And usually that those $5 billion and I did she is a snapshot relatively alex products coming out and father trending in attach that usually do $5 billion. Its have two channels. When is the online channel, which is primarily patch the vast majority of of online.
Sales by I would tell us is on patch and the other is physical or physical Starfield night.
So you can see the isn't significant tailwinds.
That we have in terms of supply as we capture or be a chunk of the mix right. So if you're a boutique or a the pattern to start on five fetch. If previously farfetched was 30% for example of uniques, because all the unfortunate closure.
Those are even you know after the closures because all of last traffic a generally installs we will we will be a bigger type of the mix. So it's not only the you know the amount of inventory that is uploaded to the platform is how much we catch up that he's already and that is a detail we.
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So we're not worried in terms of the position on supply boats false bring some its wendy and I'm looking forward.
I also would like to highlight something unique about capex, which is the he can fashion model right. So we have five times is brain.
And that have directly confession.
And in this scenario and now more thinking about autumn winter twin peaks spring summer 2001 in a scenario where brands I'm actually below where it ends up production or after losing less because I've actually closures.
And I read a scenario of rationalization of all channels.
Grants will power it ties that direct to consumer sales.
Absolutely first even probably two Kim will be for their channels and for example, we are connected to bouchey dotcom. So the same weyerhaeuser services as well she dotcom services have fetch Daimler how's that sort of if he's a private up from 75 hedge and et cetera, I said I'm just giving for example suddenly have financially.
Fashion with them and we tap directly into the brands inventory. This is completely unique because our competitors will not have access to this priority the library.
And again and I think it's its a tailwind for us difficult to say, how many boutiques are not going to survive, but I have to say you know our conversations with the peaks are encouraging.
Our but these are the best in the industry et cetera. It's been around 400. He is in fact I'm adder for decades. They are very very solid businesses and and we haven't seen you know boutique or bankruptcies. So flat now that I'm aware of then certainly nothing material.
Of course, we remain vigilant and it's not going to be an easy time for them. So we remain focused on.
On helping them out.
Finally in terms of mix between boutiques and brands Brian's have become and increasing type of our business as I've said in previous calls 50% of our available supply is now coming from direct brands relationships.
We expect that to continue during Colgate 19 until still be.
I don't think that will affect our the contribution percentish per se.
Okay, Great and the reason is our medium and small grenz actually paid more than the boutiques and if you something that is maybe a misperception sometimes of our of our model.
Brands has a big imagine in fact on brands love using and feel the research he sees and need to solutions and and and and other services on the platform, which means the take rate.
We are the majority of the brands actually I'm not the majority dollar value, but the majority number if is actually materially higher than the boutiques and so as as these different pads move and take rate may oscillate, they'll get a bit I think the biggest.
Oscillation comes from Ft ask because obviously on Sps to take rate is much lower so easy experience the direct cost of selling a these products because weve habits as you could imagine we don't pay for demand generation, we don't pay from customer service, we don't pay for free shipping et cetera, et cetera, So all deed.
That's a little bit take rate actually the other contribution percentage and it's a much higher in xps and that is the magic that we're trying to optimize their Sallie mentioned, we've we remain very focused on profitability.
And we will achieve and sustainable growth.
In Q2, but not at all costs and we will protect the imagined.
Your next question comes from Joffrey demanded so with Bank of America. Your line is open.
Yes, good evening, everyone. Thanks for taking my question I got to actually so can you talk a little bit about the relationship that you have leased consent.
Maybe some can be schools that they have something like 5% of them capsules. So what's the plan. There. So that's question number one in the second one these regarding fitting them by Farfetch.
He was said in the news that you've been helping we keep with this solution they moved inventories in your warehouses.
How is it going into service and I'm going to try to develop this more in keeping with these news you service.
Thank you supply the relationship with 10 cents.
It's fantastic and it is actually a a long term relationship we have been.
Investing behind we Chad.
A number of ideas.
We are by far the leaving luxury platform on we check or.
Not just our farfetch or media programs and traffic counts.
But we also power 88 zero luxury brands on which had a and many of the many of them out of the lives. That's named can do you see industry. So it's it's a fields, where we see 10 tons of innovation coming through and we have for example, we've started to launch.
Many programs that allow cable wells, China's a influencers to create their own curated shops.
So far fetched products.
Which has been extremely successful sites and deep like QVC a into digital age on steroids and ER and we've seen you know consumers engaging with each type of meaning program and these type of innovation.
And that has peaked a 10% interest or even more and as we state always very close to them.
You know that that glad one conversational, that's when either and obviously led to then participating in the convertible each month.
The in beginning of albeit but of course, we don't comment on a either shovel dispositions.
Well field, but by far patch.
Again, I think this is an extremely powerful solutions for the future.
We now have seeks fulfillment by far fetched warehouses. They add threepl. So we don't have any capex associated with them that Keith is with our processes and our software so they're seamlessly integrated on the platform.
And that has been used not just that boutiques that site for by brands and smell that allows us for example to acquire Mcg in August and having them shipping direct to customers and by November Ah. So extremely quick because we had spoken with batch facilities in Italy, or they they've been able to tack on that and.
We now have.
As Alan mentioned, a very very healthy and fast growing one p. or regional business. Other brands are using perfume or back half had facilities as well as we think this is a a major driver for profits.
Because it is much more efficient to ship from a centralized location.
Then to sheep Sun Prairie boutiques. So if you buy three items on patch, you'll get two or three boxes. If they are all in the fulfillment bypass actually feel that the you've got one box, obviously with the savings that entails distributors nature of our model is fantastic and makes it very.
Resilient, but it is more expensive than a centralized logistics.
The the advantages of range.
Still does remain that we will continue to distribute these model, but if we can have the main 10, 20% of skews available in centralized where I'll give it has we've modeled it that they've had the various showing the impact on how the contribution. So we'll continue to push that service and the good news is that we have more and more brand.
With that retailers that are using it and I think thats, we will also accelerate from now on.
[noise], we have time for one more question. The final question comes from Stephen Ju with Credit Suisse. Your line is open.
Okay. Thank you very much so.
I was saying earlier I think you called out in your prepared remarks, some potential danger.
To the fall winter season.
You are undoubtedly having a lot of conversations with your brand partners right. Now. So you know any way to dimensionalize what percent of the industry merchandise could be in danger of missing or I guess skipping the season altogether and secondarily like what does this mean for the usual spring summer and fall winter cadence that we're all used to.
You know any impact that you think this might have over the longer term on the fashion industry and also.
Sequentially your business. Thank you.
Thanks, I'll take that question.
I think you don't festival.
There may be delays in introduction I I, but I would like to those that indicates of Angie we didn't experience any delays I think that speaks to the incredible asset with a buyer.
A very and nimble brand platform, we very capital efficient model and we that we'd front, what do they don't own manufacturing. They they saw us from 400 different factories easily partial and other types of world They were able because of their efficient.
C to have the production sauces and be far locked down or moved around two locations on actually square.
A lot on nationals went out in place. So I'll then she she no material risk.
The rest of the industry is still very difficult to say because we're now seeing the first delivery. So it's difficult to say I think it's fair to say there will be some delay.
Safe that it will be material now or not.
What I do know is that if anyone gets to lever will be the brains direct to consumer operations right. It will be there's brands directly operated stores. It will be brand dot com it will be concessions on kind of fetch potentially confessions on other marketplaces if any.
Because they are higher imagine.
Because they are most strategic and because brands and trying to divest from wholesale anyway. This is something that as you know has been to try to lead the industry and the other thing. We also see either we are taking a much higher percentage of sales from the existing inventory right. So for every 100 pieces that.
Uploaded on the platform, we used to take set them centers that percentage is now higher.
Because the offline shandell, which lets say can beat for the inventory if you want the picture it that way or if it's obviously tapping less on that same even probably pool.
And that's very unique with our model. So that I think we'll we'll is a major competitive advantage as if you'll allow us to capture even faster market share from our E. Tailers come the competitors that are etailers essentially.
Our our move or hybrid retail E tail businesses and they don't have that capability. They don't have the direct cousin to consumer model with Brent and they don't have the agility to to Pat supply wherever supply is a week, we had it coming from 50 count.
Ladies and directly to demand wherever you Mandeep. This is very unique while we're modeling that's why you see growth.
Well were right in other players you will see shrinkage in Q2.
Great well, thanks, everyone for joining us today, we look forward to speaking to you next quarter.
This concludes today's conference call you may now disconnect.
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