Q1 2021 Farfetch Ltd Earnings Call
Yeah.
[music].
Good afternoon, My name is Christine and I'll be your conference operator today.
At this time I would like to welcome everyone to the Farfetch first quarter 2021 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session. If you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad, if you would like.
To withdraw your question press the pound or hash key. Thank you I'll now turn the call over to Alice Ryder VP of Investor Relations Ms. Ryder you may begin your conference.
Hello, and welcome to Farfetch is first quarter 2021 conference call joining me today discuss our results on Tuesday.
Our founder Chairman and Chief Executive Officer, Elliott, Jordan, Our Chief Financial Officer from Stephanie Phair, our chief customer Officer.
Before we begin we would like to remind you that our discussions today will include forward looking statements 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 for a discussion of some of the important risk.
Factors that could cause actual results to differ please see the risk factors section of our form 20-F filed with the SEC on March one 2021.
In addition, we will refer to certain financial measures not reported in accordance with <unk> on this call.
You can find reconciliations of these non <unk> financial measures to the <unk> financial measures in our earnings press release, and the slide presentation, both of which are available on our website at Farfetch investors Dot com.
And now I'd like to turn the call over to Joe Day.
Thank you Alex.
Thank you Ole close loaning is today.
I'm very pleased to report that the strong momentum we have exiting 2020 has accelerated into 'twenty through 'twenty one.
We have a significant boost in both digital platform on group GNP growth.
In Q1 group CMG grew 50% year on year with digital platform G. N V growing seeks to defend.
Exceed our previously provided guidance.
Based on the continued strong performance to date, we have also what's great is our full year 2021 outlook, we expect higher digital platform GNP growth and reiterated our expectation for positive adjusted EBITDA for the year.
We believe the strong momentum in our business is a reflection on the paradigm shift we have helped drive over the past year.
Where we have seen accelerated all line adoption by luxury consumers.
And digitization by luxury brands and retailers.
We expect this will be sustained and continue the progress which is why we are continuing to invest behind our proposition as a digital enabler for the entire global luxury industry.
As mentioned on last quarter, we are focusing our 2021 statistic 12 net.
Across five major themes of our chapter two strategy.
I will update you on our progress across the third three strengthening our luxury partnership.
China.
And the luxury new retail our early on that platform.
And I'll, let Stephanie, but they do on the remaining two sockets friends.
And our unrivaled global customer experience.
Finally on with our luxury partnerships.
We continue to build on our highly strategic relationships with our nearly 1400 luxury brands and retailers.
They are increasingly seeing farfetch as a key patent on it.
As evidenced by the fact that total leaves things on the marketplace.
Salaries for a record number of stocked units in Q1.
And they are selling faster.
<unk> growth for our boutiques and for our brands each in aggregate were both the highest since 2018.
In fact, our top 20 E concession brands and drive more than 150% year on year growth.
On average of high margin direct to consumer sales during the quarter.
As the digital enabler. We are also continuing to advance enterprise solutions to support our luxury patents.
This concludes our classifieds platform solutions or Sps services with.
<unk> powered more than 6% growth on average in Q1 in the brand docs on e-commerce channels of our more mature Sps clients those who has been on Sps for at least one year.
Last quarter, we also announced Sps's launch of E concessions as a service.
Which enables brands to shift more of their distributions from wholesale to direct to consumer.
Our multi brand retailers to access a deeper and broader selection of concession on supply in real time.
Following the successful launch of the reef E concession on Harris Dot com into fall 2020, we were delighted to further expand our E concessions as a service on Harrods to also include Brunello Cuccinelli and thing on.
With more and more brands actively prioritizing that rate consumer channels, we believe our unique <unk> solution will enable this transformation.
Not only on the Farfetch marketplace, but also by facilitating E concession on as far as the broader industry.
Turning to China.
We remain laser focused on continuing to build on our successes in these markets.
Our localized operations enabled us to attract valuable Chinese customers.
<unk>, a broad base of channels, where we engage luxury fashion consumers with our global supply from the best brands in luxury via our App.
Web site and social commerce channels, such as Wechat.
And demonstrate our fashion authority across our content services and for our private clients via local stylists, who engage with our clients on the latest fashion trends and provides access to exclusive products and events.
These robust proposition underpins, our strong performance in mainland, China, which continues to grow faster than both the U S. Our largest market and the overall marketplace in Q1.
The fact that we have continues to believer outsized growth in China, where consumers have heavy option of shopping in physical retail stores since spring 2020, when lockdown restrictions were lifted.
Further highlights the appeal of our services and offerings on luxury consumers.
And also demonstrates the sustained paradigm shift we have witnessed across the luxury industry.
On the back of our success in building a thriving China business, we will seek to boost our presence in this critical market with the launch of our storefront on.
<unk> luxury pavilion TLLP in match.
I'd like to update you on the very early indications, we're seeing from these exciting initiatives.
Third the Tmall opportunities a multifaceted partnership with two key objectives being one boosting the farfetch brand awareness in China by reaching a much wider audience.
And to driving incremental sales.
In terms of the first objective we act very enthused by the browser reaction from Chinese customers through our unique offering of more than 3000 brands.
90% of which were not previously available on PMO and which they now associated with Farfetch.
What we have seen a day initial weeks is an opportunity that seems to be very complementary flour average channels in China.
CMO customers had been particularly excited about these new brands and we were positively surprised when we saw that eight of the top 10 selling brands on our PMO star are smaller brands that rank much lower on the past such marketplace.
This is highly validating.
As it demonstrates that fast ACH is unique selling proposition of bringing an unrivaled global supply directly to the Chinese customer resonate with the wider but we can China.
We are also very excited about from demographics of the Tmall audience with initial indications of incrementals to be gained from attracting among female luxury enthusiastic customer base that is more regionally diverse across tier one two and three cities than our car.
Frankly, China customers.
TMO also a range of numerous marketing events on this platform.
Ill start from launched during <unk> International Women's day event, and we kicked off a 360 degree marketing campaign to promote our brand with female consumers.
As a result, we have seen as many visitors to our chemo star as we have through our own China App.
And gained 150000 star from France in the first two months.
In terms of our objective to drive sales. We are building momentum and are very pleased to already see sales that are multiples of the comparable results from our launch on JD.
As we continue to build our data pool and gain experience navigating the TMO ecosystem and leveraging their marketing engine, we expect it to become a meaningful channel for our China business in 2022 and beyond.
Overall, we are thrilled to have this fantastic opportunity further traffics brands with Farfetch, representing one of only 5% on the DLP home screen. While also operating a dedicated storefront offering reach luxury fashion content within T Mo Dwayne price.
Luxury consumers to continue engaging with traffic.
On TMO directly on the fact that China App.
On to platform and luxury new retail our LNR.
We have also made significant progress.
LMI represents our vision of delivering a global platform for brands and retailers by virtually unifying their customer interactions across all channels.
And offline.
With one single integration the <unk> offering enables luxury brands and retailers to leverage our full suite of Sps enterprise solutions.
Along with the <unk> marketplace and PMO luxury Brazilian.
All of which can be integrated with their own mono brands online destinations.
And Sps powered connected retail staff.
To achieve a full 360 degree view of the customer and to deliver a hyper personalized.
On seamless journey from the luxury customer across all channels.
LNR is.
Massive opportunity flow.
Puts on from the retail experience for the nearly $300 billion global luxury industry.
Just last week, we hosted an event showcasing our early on our suite of technology solutions for our more than one hands on top executives of brands and retailers.
Which was met with great reaction.
These solutions are also enabling the shopping journey at our new grounds Group Street in locations, where our customers have also been very enthusiastic about the experience.
Finally, I'm also really pleased to see the incredible momentum of our vision being embraced by partners around the world.
Upon this fronts.
I would like to announce the following.
In Monaco.
Thoughts Chanel boutique went live with our LNR connected retail solutions earlier this month.
In Qatar and pleased to announce we have signed luxury department store anchor on fast ACH marketplace seller contacts.
To help design the installed technology on connected retail experience.
The new 300000 square foot flagship.
In Brazil, I can confirm we will be partnering with feedback Matterazzo complex.
In development in the heart of San Paolo free implement our connected retail solution to create a technologically advanced luxury experience across the complex is in tier 300000 fresh foods retail village.
Finally in China, I'd like to share on updates on further LNR opportunities, we will be exploring with our partner Alibaba.
On the heels of our launch on Tmall luxury pavilion, we have accelerated discussions and plan to launch a signed retail innovation lab in China flow.
Rate as an extension of the Alibaba and Farfetch LNR innovation teams.
We have also decided to launch a physical luxury retail concept star in China to showcase the LNR retail experience.
I am tremendously excited that our luxury new retail vision is gaining traction.
Luxury brands around the world.
He knows in bringing to bear the latest technologies to revolutionize and personalize the customer journey.
I will now let Stephanie update you on the remaining two strategic pillars.
Thank you Sir Hello, everyone I'm pleased to share an update for Q1 on <unk> customer initiatives captured under our brand and unrivaled customer experience.
Which are aimed at growing and retaining IP is $3 3 million active consumers.
On the brands per Se I believe that therapy brand goes way beyond investing in brand campaign or more visible examples such as on rebranding last year. It was.
Clients, a fundamental change in mindset and ways of working line of the organization needs to reflect the end to end customer journey, along the way we have brought teams together Hyatt and expertise to bring on more integrated marketing and we have worked even more clarity with the commercial teams to align on supply and demand.
While emphasizing farfetch as a unique proposition.
This is on say enabled by a company wide program called creating customer culture, which aim 10 view every farfetch, regardless of their department with a deep knowledge and understanding of our luxury customer and their preferences, ensuring that these tenants are truly wells and into the fabric of the business.
That's sad brand campaigns are an important element and we have built on the successes as our new brand identity and full funnel brand marketing campaign introduced in 2020 with the launch of our second brand campaign in four key <unk> market.
It highlights our global boutique offering which is a key differentiator for Farfetch and one that extends our hashtag support boutiques movement initially take at the start of the pandemic and year ago.
<unk> takes time, and we look at a basket of measures to track our progress.
Recent indications from our initial brand campaign last year opened doors shared that our approach is yielding results on two key metrics awareness and consideration.
Over the last 12 months in other words pre and post campaign, we have seen an overall increase of luxury customer attending a set farfetch as the first or one of the first places they would consider yourself.
In China, one of the key markets, where we have been investing in upper funnel marketing, we have seen awareness increase year on year and consideration in Q1 was higher than any other western competitor in the market.
As we look at western market, Google headset, which measures our portion of organic searches among our peer set is a strong proxy for consideration.
In Q1, we have seen on search and our noninterest non tipped to U S increased by 36% year on year, which in combination with our brand survey results demonstrate that our brand strategy is working.
I'm actually brand partners have also taken notice of our success and applauded our approach to brand building from a rebrand to iterate the contributor timing and talent in our content on brand campaigns.
We believe that our increased declaration and confidence in <unk> as a strategic partner and contribute to a growing number of engagements with brands to execute their earned marketing strategies on the farfetch marketplace, which in turn has increased on year on year coverage and consumer products and key low cost marketing channel.
In Q1, we launched 10 significant brand partnership campaigns on the marketplace.
These partnerships are key components of our only on Farfetch initiatives are strong.
<unk> to differentiate our brand by playing to our unique strength with an ongoing focus on our boutique competition on leveraging on new guidance group acquisition and delivering exclusive brand partnership while deploying all our capability from our global reach through our innovation features.
All of which is crucial to offering our customers an unrivalled customer experience, which is our fifth strategic opinion.
Key highlights here include.
Thanks to the four times per bandwidth, Gucci, where reactivated and immersive world centered around sustainability to celebrate their off the grid connection.
This is our second multi card activation with Gucci, demonstrating the value, we deliver with a strategic partner and non termination chip with brands.
We leveraged our investments in new Guards group by offering our customers exclusive capture through silicon enabled such as ambush Anton Angels.
Leaching on localization continues to be key and in celebration of Ramadan, we curated and exclusive collection from 13 middle Eastern and international design rate.
Our positively Farfetch ESG efforts to be a platform for good I also evidenced by partnerships such as on recently curated edit for FTE trends and our collaboration I found that in Macau for Black history month.
As a platform to.
Hamzah customer experience via our service offerings and this quarter, we were delighted to offer the farfetch fixed maxi restoration setting in partnership with one of our open innovation start ups directory encourage ticket average.
These brand partnerships and services can drive co branded marketing revenue that also enhanced experience for our customers and we believe ultimately contribute towards improved your attention.
In Q1, we continued to see positive trends on retention with our existing cohorts outpacing historic trends, but we have also continued to see better retention from our earliest cohorts of customized from the acquired during the pandemic in Q2 2020 as compared to the Q2 2019 cohort.
Thanks to a targeted demand generation efforts and that business strategy to reduce promotions. We are finding that these customers a higher mix of whom were acquired by our full price sales and higher repurchasing.
Finally in addition to our ESG initiatives with various brands and services. We were also thrilled to publish the first edition of our conscious luxury trends applied on exiting.
The reported high net numerous data insights across our platform such as the fact that 88 percentage of customers cannot take care about minimizing the environmental impact and the customer sales three times as many bags via our second nice program in 2020 as they did in 2019, all events to help inform the overall engine.
G and incorporating more conscious practices and program.
And now I'll hand, the call over to Elliot to discuss our financial results and outlook.
Thank you Stephanie and Hello, everyone. The first quarter of 'twenty to 'twenty. One demonstrates continued strong demand for products tied across the Farfetch platform, we delivered a year on year increase in GMB of 50% through $916 million.
Digital platform GMB growing 60%, so $790 million.
This has driven 40.
6% increase year on year in group revenue to $485 million.
54% year on year growth of digital platform services revenue to $296 million.
Alongside this growth rehab achieved stronger unit economics delivered third operating leverage and improve our profitability position with adjusted EBITDA of minus $19 million compared to minus $22 million in Q1 of 2020.
As a result, the overall financial position of the company.
<unk> of our own expectations and previous guidance and we continue to remain very confident about the risk of 2021, raising guidance on GMB growth and reiterating our guidance around full year profitability at the adjusted EBITDA level.
I'd like to run through some financial highlights by business segment.
Powertrain with the digital platform.
<unk> growth accelerated out of the previous quarter.
60% year on year in Q1.
This is the second fastest growth within the digital platform.
The last 12 quarters.
This was underpinned by an acceleration in growth within the marketplace.
Driven by stronger year on year growth in orders from existing customers.
<unk> of 480000, new customers in the quarter and an 8% increase in average order value as a result of consumers buying higher price point items.
And a higher full price mix year on year.
This growth was geographically diverse with notably strong year on year performance within the UK the middle East the risks, particularly across our final four weeks of the quarter.
And mainland China, where we saw an acceleration of growth and third the gain in share of overall demand relative to the marketplace.
Unit economics across the digital platform remained strong.
<unk> platform order contribution margin up 100 basis points year on year to 33%.
The key driver of this improvement to margin was an increase in the first party gross margin from 25% last year to 35%. This Q1.
This is the result of a full price mix within brown and increasing direct to consumer trade from new guards brands.
We also reduced investment in promotions across the first party and third party proposition.
Partially offsetting these improvements were the impact of higher cost of revenue first higher duties and other handling charges as a result of the <unk> withdrawal from the European Union.
And impact from European digital services taxes.
<unk>.
COVID-19 linked increase in logistics costs per order.
We also took the decision to reinvest some of this margin improvement back into customer engagement, which is reflected in demand generation media spend of 21, 6% of digital platform services revenue versus 25% last Q1.
This investment is on the back of growing demand for luxury online, which translated to the highest number of new Q1 marketplace customers.
Continued strong retention and demand from existing customers.
Payback of customer acquisition spend well within six months.
On a three months LTV over CAC ratio for the Q2, Q3, and Q4 2020 cohorts above the respective cohorts for 2019, and 2018 and a clear opportunity to develop our engagement channels on the global market price.
Particularly in China.
Other key Q1 update on the digital platform include <unk>.
<unk> growth year on year on a constant currency basis of 54%.
Third party take rate of 29, 7%.
And first party GMB growth of 59% year over year, now representing 15% of digital platform GMB balance of which 3% the loans to third party original.
Turning now to the brands platform, where we continue to FERC on partnering with brand enhancing retailers as rebalanced stock between the wholesale channel and the higher margin direct to consumer proposition across the digital platform and our own retail locations.
This means fewer highly strategic relationships moderating growth on the brand platform and improving profitability.
As a result, the brand platform achieved <unk> revenue of $112 million slightly ahead of the guidance provided last quarter.
Importantly, gross margin has expanded from 49% last year to 51% this year to deliver $58 million of gross profit.
Turning now to operating expenses, we continue to deliver overall operating leverage.
This leverage is the result of cost growth from within our technology platform, our corporate functions and our production studios growing 28%, 25% and 23% respectively.
<unk>, 236% year on year growth of adjusted revenue.
But <unk> is net of investment into our long term strategic initiatives.
<unk>, a new fulfillment by Farfetch facilities in the Netherlands, which we believe will mitigate a significant proportion of Brexit related cross border charges.
Brand building activities to drive upper funnel customer engagement.
And technology spend to develop our beauty offering.
Q1, depreciation and amortization was $54 million and our share based payment expense were $40 million.
A quick mention of the $660 million gain then items held at fair value.
As a direct result of the reduction in the sausage share price since December 31st the settlement of our convertible notes and JV in the Middle East is not against the Farfetch share price.
The gain reduces some of the charges we have seen on this line are the recent quarters and has resulted in a Q1 2021.
<unk> after tax of $517 million.
Let's now look ahead to the coming quarter and the upgraded outlook for the full year.
Based on the strong momentum we have seen year to date for positive leading indicators with regards to demand across the digital platform for Q2.
And more confidence in the broader backdrop of global luxury consumption for the second half we are upgrading our full year digital platform G&P expectations to now be between 35% to 40% growth year on year.
This would represent a two year growth of 91% to 98%.
This additional growth allows us to continue to invest in the longer term opportunity and we will be driving additional customer engagement.
And increasing investment in platform development with a focus on delivering long term sustainable growth.
As such there is no change to the expectations for profitability.
We reiterate the previous guidance of 1% to 2% margin at the adjusted EBITDA level.
For Q2, our expectation for the digital platform is GMB growth of 40% to 45% year on year.
This takes into account the annualized nation of new customer growth last year, and lapping of Harrods dot com and off White Dot com launches on is to yes, which on Mount like for like within the digital platform moving forwards.
Digital platform order contribution margin is expected to be between 34% to 36% of digital platform revenue as we continue to navigate the short term challenges of Brexit and we continue to invest in media spend to bode on the strong customer cohort.
Sure.
Brand platform <unk> and revenue is now expected at $50 million to $60 million.
This position reflects a shift for the full winter of 'twenty, one 'twenty two season towards them.
Season deliveries, which means shipments to our wholesale partners and now closer to when these items moving warm via customers.
Last year full winter shipments and associated revenue was spread across Q2 and Q3, whereas this year. The majority of shipments are being shifted into Q3.
Q2 brand platform gross profit margin is expected to be between 48% to 51%.
And finally Q2 adjusted EBITDA is expected at minus <unk> three to minus $25 million.
Sure.
Thank you Elliot.
Let me close by reflecting on how these results clearly demonstrate superb execution against our long term vision.
Which could not have been achieved without the continued dedication and.
Of our more than 5000 <unk>.
We continue to leverage the platform infrastructure, we have deals with.
<unk> very strong growth for our patents.
And deepening our relationships within the luxury industry and enhancing the proposition for consumers as a result.
All of which puts us in a unique position.
To continue to gain share of the nearly $300 billion opportunity, we see in becoming the global platform for luxury.
Thank you I'll now ask the operator to open the call for Q&A.
Thank you as a reminder to ask a question you will need.
The press Star one on your platform to withdraw your question press the pound or hash key please standby, we compile the Q&A roster.
Your first question comes from the line of Stephen Ju from <unk>. Your line is open.
Okay. Thank you so Jos a.
Wanted to ask you about the technology you were showing at the new luxury retail presentation of Brown.
Does look like it will require retailers to invest in day in stock mirrors on some of the other stuff.
That was my take on the hangers.
And clearly they're buying into this given the announcements with the shutdown on pumps on them, but.
What is the pitch to these retailers in terms of what return on investment.
If they can expect to see that Elliot should we assume that embedded within the second quarter guidance, our assumptions of perhaps into ongoing marketing inefficiency in your demand acquisition expense as well as what maybe brand campaigns in your G&A expenses.
You guys ramp up on Tmall in China. Thanks.
Great.
Yeah.
Thank you.
Of course.
Early days in terms of measuring the return on investment in the numbers.
We have from.
Chanel.
Very very encouraging and on the back of that Chanel is expanding.
Most available peaks, we just launched the technology and volatile.
And that's causing revenue, it's only a few weeks ago, but we're already seeing.
Double digit.
Sales increased net sales coming from.
The connected retail technology specifically.
So I think the.
More important.
Then that obviously.
We believe our consistent double digit boost 20 retailer that's transformational right. So.
In itself, but I think.
The key here is in.
A fully connected.
On journey for the customer.
So today, if you're a fewer brands our retailer.
Is on those investments that are coming into the sales you heal luxury brand say that 70%, 75%, 80% of the customers that come into their stores.
Nice.
You don't know which products they take off the shelf is on low which products they take.
Take for the fitting rooms.
And and that is what we are changing in the industry that is absolutely revolutionary.
So with the combination of the consumer App the <unk> app on the connected devices and the star and the fast ACH Smart tag which is.
She is on R&D effort that is filled with Perry.
We know we can identify the customer that comes into the store.
Of course there.
<unk> is an operating legally required athene.
As Joaquin.
As you browse deposits into star the smart tag picks it up so it knows that the product is being lifted if it passes it's been turned around it's moving around the story knows exactly where its moving.
Our result in Q4, it triangulates between positioning the star product and consumer.
On that.
Completely unprecedented in terms of the data that can you can you can get from that.
And about the possibilities.
No.
Areas of profitability aside from.
CRM from from the fact that you as a customer can get into star Fendt weighted and that's fair get out.
And you'll know what everything you've touched on that start using our wish list and that in itself incredible because the customers with pilots visits this leaves.
Globally, we believe there on that is like.
They don't need to scan any product they don't need to.
There is no RFID involved here.
And.
And this in fact was a data that can be derived from this.
And also the user experience. So we're very very excited we think this brings.
Retail to us when neither.
You know that the level.
And he's going to continue to revolutionize the industry because the EPS. The connected journey as you come into the star of the surfaces of knows what you have is on the website.
Not just <unk>, but that's what we're having to which leads to what we've had recently browsed.
So that unified view of customer a unified view of traverse unifies email journey across offline online multi brand multi brands.
On sometimes retail Nirvana.
And I think thats, what theyre delivering on and it's ready to go to market and that's what's getting <unk> <unk> hundred thousand.
Square feet.
Luxury developments each.
And we're going to have this working at very large scale as well.
So watch the space.
I think that's the attraction here.
Hey, Steven.
Pick up on the marketing spend and what we're seeing there.
For us at the moment, we're seeing fantastic growth from engagement with the customer cohorts I mean 480 sales from new customers in Q1, which is on the back of 500000 customers there or thereabouts the last three quarters on the road.
On shows that the environment is right to be capturing new customers as this paradigm shift to online continues.
And.
The results that we're seeing from the customers that we acquired are Q2 Q3 last year as a fantastic lifetime value so as.
As I said earlier on the three month LTV over CAC for these cohorts is much stronger on the equivalent of cohorts from the previous two years, we see a faster payback on investment.
It's really the right thing to do to lean in on these opportunities we are seeing primary speeds coming down elsewhere, we're seeing.
<unk> fees coming through on.
The third party business that particularly around of the growth in full price.
And the fact that were acquiring so many customers most food price mix is increasing.
Sales of food price are growing faster than primarily sales on markdown sales means the quality of the customers. We are acquiring is also very strong.
But from our history that a customer required on the primary reason is great moving forwards in terms of LTV as a customer that's acquired during full price period. So we're actually seeing an enormous with customers is the right thing to be doing right now and as we see them I mean to moving China Joseph Tung.
So on it before stronger growth out of the U S. As we exited the quarter.
Really the right thing to do to capture and continue to engage with the customer base. So thats why youre seeing.
This was slightly up year on year on demand generation in Q1, and as you say in the Q2 numbers, we are reflecting that in the order contribution it's time relatively stable year on year. That's also managing some short term challenges around costs due primarily to the uk's withdrawal from.
The European Union challenges around duties and handling costs that we're seeing across the coming weeks, but also reflects this investment on the customer and then in terms of brand is.
Stephanie said earlier on really good.
So the early results coming through from the brand campaigns on the way.
And the team have done to refresh the farfetch proposition with customers. So again leaning into that as we move forward, which is in the SG&A numbers for Q2 and Thats what sort of reflects the EBITDA does it shouldn't just be margin year on year as we move towards full year profitability on that.
Coming three quarters.
Yes.
Your next question comes from the line of Laura Chen from Morgan Stanley. Your line is open.
Great. Thanks, so much.
Regional performance you gave in your prepared remarks.
Really helpful sounded like the U S.
On accelerated in the month of March curious.
Theres anything you can sort of comment on in terms of what you've seen regionally.
In April and early May and then generally sort of performance in regions or areas where.
Stores have reopened and then.
Just a modeling question any way to sort of help us quantify how much anniversarying that day, Harrods dot com and off white Dot com.
We'll have in terms of impact on net on the second quarter cash.
Platform growth that would be great. Thanks, so much.
Sure Hi, Lauren Great question. So yeah, we're very encouraged by the regional data.
China accelerating of Q4 into Q1 clearly is the goods on the UK was particularly strong all the way through Q1, obviously starting to reopen.
On April retail locations here in the UK. So we continued to drive strong growth.
Even after that reopening and you with.
The last three or four weeks out of the quarter was particularly strong on that day.
<unk> carried through into the day.
Early part of the quarter that we're now and so we'll see.
And really good strong growth continue into into the quarter, hence why the guidance of 40% to 45% I think is slightly bigger than most numbers.
And the street.
<unk>.
One thing is really key is that it's.
What about food price zone.
The full price offering the spring from a 'twenty one collections that we have on the platform.
During this appeared to be well.
Our sellers have leaned into that offering they're being rewarded with very very strong growth of food price growth was up over the overall average year on year for failure from about 58%.
So we've got a motive stopped going into the campaign over the coming quarter and so we're very pleased with what that means plus also the backdrop is much stronger we're definitely getting a sales from customers that although retail locations have reopened they are shopping online. This paradigm shift to online is here to stay.
Enjoying the convenience the selection and the speed of service that our logistics team is able to offer to the customers and so we're seeing continued online on demand, even though store option on via now for customers. The same in the middle East.
We're seeing good strong demand across the quarter from middle East, even though stores. This day in order to me. So I think overall, there's 10 years to go around.
As luxury really flow starts to grow across across the rest of the year.
In terms of the question about modeling that.
As Bruce leader stepped down from 62 the forties.
From Q1 to Q2 is by and large the annualized nation of Harrison Bowflex Com I'm very confident in how the marketplaces performing and the other EPS clients that are on a lot flow basis as Jerry as I see it continuing to deliver very very strong growth. So that's sort of stick them that we are seeing from Q1 Q2 is all about.
<unk> now becoming more like for like.
Your next question comes from the line of Oliver Chen from Cowen Your line is open.
Alright. Thank you. The Tmall early reads are very encouraging but what are your thoughts in terms of how you'll think about assortment from the learnings you're loyalty approach to this customer base and also of the manifestation of the Farfetch app relative to accessing farfetch true team.
Paul.
Elliot would also just love your take on <unk> going forward.
And how that dynamic may be impacted by both the attracted new customers and as you think about apparel on product mix. Thank you.
Hi, Oliver it's Stephanie Thanks for your question, Yes, we are very encouraged by the at net campi without.
Alaska any day.
Hudson third indicated to be positive I think going back what we have to think about it is that we have a very strong stand alone business in China at the Farfetch App standard in China.
A really compelling proposition, we have all of the Nazi ban on that and so the way we're thinking about net tmall App is winnie as a complementary take net.
So I think as you pointed out the idea is how can we many down.
Pipeline of loyalty and third infectious circle between these two channels and I think this is just a standard packaging in China that Chinese consumer functions on multiple channels and the <unk>.
If you need to working through multiple channels and thinking about how to attribute.
It really is about.
Looking at results and learning how to play that game.
So as I mentioned and inspected <unk> net.
Learning how to laugh Hasnt sales.
Business on TLLP, but we're also thinking about very consciously how do we segment that touch on base, how can you speak.
Different audience. So we should really think about one.
One Chinese app and how that can maybe be upside and complementarity from that from that standpoint.
And just on the on.
Very sort of.
Optimistic about if that's the right word as we move forward as a two day layer on the food price mix coming through very strong and customers clearly bond into categories that have higher average selling price you will know this on.
Last year people were in the sort of stay at home casual we.
On the Max style clothing, which obviously comes at a lower average selling price we are seeing customers buy into the the most sort of going out of <unk> driven.
And Tyler increases and most of the higher price point categories within clothing.
Which is up above the overall average in terms of growth.
What is leading.
Growth.
The highest category with actually watches and jewelry. So we again had triple digit growth within.
Watches and jewelry, which obviously helps push the IRB up as well, particularly on the fine jewelry fiction.
And then children's we are growing very strong and accessories also growing very strong.
We're very optimistic on the IRB should be positive as we travel through the rest of the year.
Your next question comes from the line of Douglas Anmuth from J.
P. Morgan your line is open.
Hi, This is Katie on for Doug Thanks for taking the question.
Following up on.
Farfetch launch on Tmall luxury pavilion.
What are the areas that both strength and can make this a meaningful channel in 2012.
And give a view longer term on with EBITDA.
Hey, guys.
Thanks.
Yes, I think we are.
Really really excited.
First about China in general.
As you know China will be.
Absolutely critical.
Actually in Chinese customer sizes from 50% of.
Of this industry.
On the engine of growth of the industry today already.
And we are winning in China.
<unk>.
Growing very fast in China is growing faster than the last otherwise with market faster than the average of the marketplace.
Primarily.
While their own channels.
But we see we see this as a multichannel approach right. So we've had.
We are very successful on wechat.
We will continue to launch innovation in order.
These products there.
And that brings us to PMO and we are we.
Really really excited about these early results as two months.
After we launched.
We are seeing.
Really.
Real engagement from customers. So the number of customers at the ECB at our PLP stuff.
Whilst the same that we did our app from the tactic is definitely there.
Where we see complementarity on the demographics and more female tier two tier three.
Customer.
What's our exciting the customers are engaging with bank debt.
On your Capex in China So.
I'll take example brands like shocking news.
Marine Sir Tom Brown, they are in our top 10 on chemo, which is very very income.
Hurricane because.
From these bolt on operations in China analysis, nothing seems to be on TMO into the Chinese entity is a team take MCC rise LNG has the most lazar rather than just renting on talking about them and they werent until as Youll know they add up on.
Hemo directly or in China.
They will be buyers.
So I think.
This is really really exciting because it shows complementarity one of our growth was to deal with the brand in China Chinese customers.
Based on such far far targets when they asked hopping on Baidu, primarily they search for fashion in the fashion category every day touch on Taobao.
She has talked about the most within that.
And so in terms of brand awareness.
<unk> is critical.
And we're seeing very very encouraging signs and in terms of sales as we always have.
We're going to continue to build momentum.
To make these meaningful.
Channel four hour class at Cheyenne abusing the things, where we take it to and beyond.
We're already seeing multiple times the sales that we saw a similar.
Star from we've had with another player in China.
Last year.
<unk>.
And.
It's all on track so.
Very very happy and on the on the back of that Alibaba is also accelerating our partnership with just as we launch an innovation lab.
Far as the acceleration of luxury retail.
In China.
Rich.
She is a very interesting so.
Incredible news coming from China on all of them.
Hello.
Okay.
Okay.
Hey, thanks, everyone on OLED.
Just two questions on the on the brand platform.
Revenue growth this quarter I understand the shift to fall winter can you maybe just help us understand could you quantify the shift or maybe let us know what you are planning for brand.
Our form <unk> in the third quarter, just to help us kind of understand that smoothed that out and then could you just talk real quick about the fully diluted share count and the uptick in Q1, but from our converts just trying to understand what happened there. Thanks.
Yeah, it's really high.
I mean broadly what we're seeing is low.
Let me just flow to sort of what's happening with the brand platform.
The effectively we're able to with our supply chain now.
Deliver product to our retail continents in season.
Which means that the prior season has a longer selling member.
The focus on sort of backing up to each of the stores and therefore, there is a longer period for.
The business is to sell through product.
Knockdown as early as they previously had done this is something that we're seeing more broadly across the industry and we're really pleased that new guards group.
<unk> is able to.
It really adopt this.
With their customers and that means that the product is fresh for.
In consumers and season, the drops are really landing and ready for sales and again thats, allowing the <unk> to drive full price mix and ultimately.
Strength from the brands.
Overall position within the market and so what we're seeing is compared to last year.
The drop that we're talking about is effectively moving into Q3. So we would normally expect as we saw in Q1.
The slight increase year on year in terms of of sales, so sort of 3% to 5% across the whole season clearly with.
On the number of shares for Q2.
The bulk of it will move into Q3, so that would be the number that you need to put in your models for Q3.
Is to make sure that the old rule two quarters drive it sort of on.
After three full flow at the same sort of year on year growth.
In terms of the dilution on the free accounts.
For the first time, obviously, we're sharing this because of the profitable position.
We're seeing the weighted average number of basic shares that $355 million that goes up to 452 million on a diluted basis.
And the risk between that.
Secondly.
Brian on the three convertible notes for the February notes $20 million.
May 2020 notes is $25 million of dilution than they are in the notes.
On the $5 million of dilution.
On top of that we've also got the aggregator dilution from employee share option schemes, which is roughly 31 $32 million.
The reconciliation and those options games as I see the cumulative effects of the over the last sort of three years or so of grants being made.
Two colleagues and the profits from rule.
Long term incentive plan, which obviously airlines.
<unk> of the team to shareholders.
We have time for one more question. The final question will come from.
Single first from Goldman Sachs. Your line is open.
Hi, good evening, everyone. Thanks for taking my questions.
I'm going to start with guidance, if I can I think.
Okay.
Very encouraging trends about volume.
If we look at the numbers.
The big increase of $3 3 million to 2 million a year again.
I guess, what can you tell us about the cash there.
Maybe insights from access.
Got it I guess, even increased Tonight.
Conservative as we think about net run rate and then you paces are active.
Each quarter, so I'm just wondering if when.
Not thinking correctly about average.
Is that relative returns.
And the second question I had was just on China. If I may we talk a lot about the big brands and access to Mega brands on the inventory levels.
Missy tricky figure opportunity about that long tail of private brands and <unk> distribution in China.
ADT from this move.
Brian how are you.
Disproportionate impact on COVID-19.
Again on the REIT.
Thank you.
Hi, Louise it's Stephanie I will take the first part of your question and then I'll hand over Q and yet on guidance that cat, but yes, you're right. We have the largest number of active customers $3 3 million we have grown.
Half from Indian dealers.
After three successive quite yet so we're really seeing momentum there and as long as it's a balance between acquisition and retention, but the good news is that our retention efforts are aided by the fact that take into high quality customer the customer that we've acquired.
On at Chipotle sales, we've acquired them often to high value product and we're really seeing downstream from Phil intensify retention efforts, we think about.
So there's a number of merchandise sales, which access is one of them we have many many.
Relative to your attention that access is probably the most visible and final testing and so on a customer and that since you specifically asked about access we are seeing improvements there.
One measure net cabinets billing types of customer and actually year on year, we've seen a 13% increase.
From access mandate on.
And who are year on year on net orders per customer.
<unk> sales from the same.
Same customer day.
We're also seeing.
Other assets, such as push notifications and half from 19 as essentially uptick in with us to access through the App.
Moving into the value exchange that we're giving now we are very confident and I think that is that it.
Ken and GAAP.
And we see this momentum continuing both on new customer adds on a really good metrics around retention purchase rate long term value. Thanks Chang on LTV to CAC question.
And then in terms of sort of looking forward Louise.
I think we are building and what we're seeing is a mix of obviously those larger cohorts from from last year.
As I explained on the last time, we made the dropout rate that.
Historically.
<unk> e-commerce businesses see incentives from sort of 12 months dropout from Troost order to retained.
As deeply with sign their retention is detailed on previous cohorts looking back, but we still have to annualize those.
Clearly non numbers.
And.
Now that we are going to be like for like 500000, new customers per quarter.
The number is impressive and we are absolutely delighted to be continuing to capture these numbers, but that will.
Need to possibly the stroke mountain that we see.
Really become more like for like so.
The number of 40% to 45%.
Year on year growth for this quarter reflects all of those sort of annualized nations.
With no signs of an increase in <unk>.
And obviously strong order growth from what moving existing customers as we now go into Q2 and annualize on all those customers come back to Mike.
<unk>.
Please proceed earlier on ESP as clients continuing to drive good lots of our growth rate.
We've not talked about any new <unk> clients.
These non incremental growth in the Q2 numbers from our new <unk> clients to.
Talk about sorry.
I believe on on China.
I think the water question.
The great question was on supply and supply of differentiation.
Super brands versus smaller brands.
So let me try to.
Give you the lay of the land in terms of our unique.
<unk> in terms of supply in China.
We are bringing to China.
On over 3500 brands on our App.
The brands that you see.
On the UK, assuming youre, calling it from the U K are those coming from the west.
At the same brands that our Chinese customer fees for when we do a deal with a brand it's a global deal.
So the 550 directly concessions.
We have from the likes of Wuxi to the private order flow Valentina is etcetera and all those brands are available on the fact that China App.
That's what we bring is a unique assortment of those super brands.
We've done our SKU count and on.
On Tmall.
And we expand the SKU count.
Another offset on size on average.
Those brands that have effect on some people right. So what we are bringing in terms of the pupil brands from the Chinese customer.
This incredible assortment that they wouldn't sign in China, even in physical stores even online.
On the Chinese customers, what are used to travel and go to Milan Paris from yard because they've now been signed is very unique.
Profits from from the Super brand.
And that is the incredible value proposition for the consumer.
Is that have the smaller brands.
And.
We're very excited because this is really our role of connecting the creators and curators.
And the consumers of fashion all around the world because our nation and for these small brands and you can imagine how transformational EPS with one single integration on Farfetch they are exposed to <unk>.
$2 3 million active shoppers spot on in Colfax luxury at $600 plus average order development Chinese even higher on their exports to China, and Russia from Capex with Alpha one on T Mo 90% of the brands.
Exposing on TMO don't don't have a PMO third.
And.
And we knew those brands have traction in China, because we knew it from our fast that China App, we didn't know how they will fare on.
T Mo right. So that was a question Mark we didn't know, okay 800 million customers a much much for other audience.
The customer is going through.
Be engaged with.
With our <unk>.
Sure Lee.
One day offering.
And they are on there actually.
Presently engaged as I said.
On.
Our top.
10 brands on Tmall.
Any of those.
Cool small.
At <unk> brands.
And of course as an analyst.
On the vessels on that side of the line and we'd like to know also that our take rate is higher on those smaller brands.
Profitable for us.
They're above the 30% average take rate.
And on.
And I think it's all about this we've curated offer any flow alto all about complementarity rate, so as a complementary channel Flores, which.
It's showing tremendous incremental <unk>.
I know everyone is focused on sales force.
We're also focused on that complementarity of channels and targeting different audiences on.
And we are extremely extremely happy with the results of that.
Terrific well, thanks, everyone for dialing in and we look forward to speaking with you.
Even a few months and have a good night.
This concludes today's conference call. Thank you for participating you may now disconnect.
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