Q3 2021 Farfetch Ltd Earnings Call
Speaker 1: Hello and welcome to Farfetch's third quarter 2021.
Hello, and welcome to Farfetch is third quarter 2020.
Speaker 1: Joining me today to discuss our results are Josie Nevis, our Founder, Chairman and Chief Executive Officer, Elliot Jordan, our Chief Financial Officer, and Stephanie Fair, our Chief Customer Officer.
Joining me today to discuss our results are Jesse Nevis, our founder Chairman and Chief Executive Officer, Elliott, Jordan, Our Chief Financial Officer, and Stephanie Phair, Our chief customer officer before we begin we would like to remind you that our discussions today will include forward.
Speaker 1: 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 may today speak only to our expectations as of today. We undertake no obligation to publicly update or revise.
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.
Speaker 1: For a discussion of 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 SEC on March 4, 2021.
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 four 2021.
Speaker 1: In addition, we will refer to certain financial measures not reported in accordance with IFRS on this.
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.
Speaker 1: You can find reconciliations of these non-IFRS financial measures to the IFRS financial measures in our earnings press release and the slide presentation, both of which are available on our website at farfetchinvestors.com. And now I'd like to turn the call
And now I'd like to turn the call over to Jesse.
Speaker 2: Thank you Alice and thank you all for joining us today.
Thank you Alex and thank you all for joining us today.
Speaker 2: On this call, I will give you an overview of Q3 results and share how we navigated the dynamics over the quarter, as well as touch on the stronger trends we're seeing today in Q4. I will also cover the exciting developments we're planning for our luxury new retail vision and our FPS business unit, and finally, provide a quick preview of some of our strategic initiatives for 2022.
On this call I will give you an overview of Q3 results.
Sure, how we navigate through the dynamics over the quarter as well as search on the stronger trends, we've seen to date in Q4.
I'll also cover the exciting developments, we are planning for our luxury new retail adhesion and our Sps business unit and finally provide a quick review of some of our strategic initiatives for 2022.
Speaker 2: Starting with Q3. In Q3, Farfetch extended our track record of delivering aggressive market share capture. Digital platform GMV increased 23% year-on-year in Q3, with group GMV up 28% year-on-year. And we are continuing to demonstrate significant market share capture at a faster rate than our 30% CAGR target.
Starting with Q3 in.
In Q3 classic extended our track record of delivering aggressive market share capture.
This is a platform <unk> increased 23% year on year in Q3 with group <unk> of 28% year on year, and we are continuing to demonstrate significant market share capture at a faster rate than our 30% CAGR target.
Speaker 2: We accelerated our two-year stack digital platform GMV growth from 89% in Q2 to a tremendous 97% in Q3.
We accelerated our two year stack digital platform <unk> growth from 89% in Q2 to a tremendous 97% in Q3.
Speaker 2: No upscale luxury fashion company, including e-tailers, has reported such fast growth.
No that's scale luxury fashion company, including E. Tailers has re policies such fast growth.
Speaker 2: While this growth was unrivaled, our results fell short of our forecasts as the extraordinary full price growth rates we had seen through the first part of the quarter shifted to what were still very high levels, but lower than what we had seen exiting Q2 and during the first part of Q3.
While this growth wasn't rivaled our results fell short of our forecast as the extraordinary full price growth rates, we had seen through the first part of the quarter shifted to what were still very high levels, but lower than what we had seen exit.
In Q2 and during the first part of Q3.
Speaker 2: The reality is it's very hard to predict the evolution of explosive sales growth in an unprecedented market environment.
The reality is it's very hard to predict because the evolution of explosive sales growth in an unprecedented market environment.
Speaker 2: In Q3, we have to forecast against both strong comps from 2020 as well as hyper growth of our full price sales at 90% year-on-year exiting Q2.
In Q3, we had to forecast against both strong comps from 2020 as well as hyper growth of our full price sales at 90% year on year exiting Q2.
Speaker 2: In September , we saw a later start to the autumn-winter 2021 season. At a macro level, Google Trends indicates the impact was industry-wise, with slower search growth for luxury products in Q3, which has shown signs of recovery since then through October .
In September we saw a later start to the autumn winter 2000 <unk> season at.
At the macro level, Google trends indicates the impact was industry wide with slower search growth for our luxury products in Q3, which has shown signs of recovery seem stand through October.
Speaker 2: In other words, what was hyper-growth in full-price sales at 90% year-on-year exiting Q2, shifted into high-growth in the crucial autumn-winter 2021 full-price month of September . This shift in demand, combined with IDFA, contributed to higher demand generation costs.
Other words, what was hyper growth in full price sales at 90% year on year exiting Q2 shifted into high growth in the crucial outcome winter 21 full price months of September these shifts in demand combined with <unk>.
<unk> contributed to higher demand generation costs.
Speaker 2: resulting in lower levels of profitability than what we had expected for the quarter. During this period, the teams have invested in order to test and learn how to navigate this macro environment.
<unk> in lower levels of profitability than what we had expected for the quarter. During this period. The teams have invested in order to test and learn how to navigate this macro environment.
Speaker 2: And I'm delighted to share that in Q4 to date, we're back to our previous levels of profitability while continuing our strong market share capture.
And I am delighted to share that in Q4 to date, we're back to our previous levels of profitability, while continuing our strong market share capture through.
Speaker 2: Through the first six weeks of Q4, we have seen regular improvements in our largest market, the US, and the China single-stake event earlier this month was strong.
Through the first six weeks of too far we have seen regular improvements in our largest market. The U S and the China Singles' day event earlier this month was strong.
Speaker 2: Overall, this puts us on track to deliver digital platform GMV growth of 18 to 22% in QFAR, which translates to circa 80% growth on the 3S tech.
Although this puts us on track to deliver digital platform <unk> growth of 18% to 22% in Q4, which translates to circa 80% growth on a two year stack.
Speaker 2: Our Q3 decision to use our profitable LTV over CAC ratios to test and learn how to adapt our demand generation strategies in the face of IDFA and other media inflation pressures has already delivered meaningful improvements.
Our Q3 decision to use our profitable LTV over CAC ratios to test and learn how to adapt our demand generation strategies in the face of <unk> and other media inflation pressures has already delivered meaningful improvements.
Speaker 2: And so far in Q4, we have seen a recovery in demand generation as a percentage of sales. And our contribution is on track to be 30% to 35% in Q4.
And so far in Q4, we have seen a recovery in demand generation as a percentage of sales.
And are the contribution is on track to be 30% to 35% in Q4.
Speaker 2: Moving to luxury new retail and our SPS segment, where we have some key strategic developments.
Moving to luxury new retail and our Sps segment, where we have some key strategic developments.
Speaker 2: We always said Farfetch was more than just a marketplace.
We always said Farfetch was more than just the marketplace.
Speaker 2: We are on a mission to build the global platform for luxury.
We are on a mission to build the global platform for luxury.
Speaker 2: We believe luxury is going to be revolutionized by the digitization of the physical experience.
We believe luxury is going to be revolutionized by the digitization of the physical experience.
Speaker 2: We call this luxury new retail our L&R.
We call these luxury new retail our LNR.
Speaker 2: seamless merger of both offline and online modes of shopping.
The seamless merger of both offline and online modes of shopping.
Speaker 2: And I believe 2022 will be a year where FTS will expand and unlock significant potential for Farfetch.
And I believe 2022 will be a year, where sps will expand and unlock significant potential for passage.
Speaker 2: Our platform can be leveraged in many ways Our current flagship product is the SPS end-to-end suite of e-commerce SaaS solutions
Our platform can be leveraged in many ways.
Our current flagship product is the SBS end to end suite of E Commerce, SaaS solutions, where.
Speaker 2: where we count Harrods and over 20 other luxury companies as clients.
Where we count Harrods and over 20 other luxury companies as clients.
Speaker 2: You will have read the announcement from Richemont, which describes the potential adoption of this end-to-end SDS suite, both for their Maisons and YNAP, as well as the Richemont Maisons joining our marketplace.
You will have read the announcements from his small which describes the potential adoption of this end to end SBS suite, both for their resolve and why NEP as.
As well as the <unk> zone shining our marketplace.
Speaker 2: I want to reiterate that there is no guarantee any deal will be successfully completed.
I want to reiterate that there is no guarantee any deal will be successfully completed.
Speaker 2: While we work on progressing these conversations, we continue to have a strong SPS pipeline of other enterprise clients. And we've seen an acceleration of discussions now that the post-lockdown phase of the COVID-19 pandemic has been stabilizing.
While we work on progressing these conversations we continue to have a strong pipeline of other enterprise clients and we've seen an acceleration of discussions now that the post lockdown phase of the COVID-19 pandemic has been stabilizing.
Speaker 2: Let me walk you through what's getting luxury brands and retailers incredibly excited about FPS.
Let me walk you through what's getting luxury brands and retailers are incredibly excited about Sps.
Speaker 2: One, connected retail, where we have Chanel, Browns and Tom Brown among our clients, is a truly revolutionary technology that fundamentally changes the experience of luxury customers in-store.
When connected retail, where we have Chanel rounds, and Tom Brown, among our clients is a truly revolutionary technology that fundamentally changes the experience of luxury customers in star.
Speaker 2: Two, our Curiosity China team offers best-in-class China expertise and a suite of products that has enhanced the digital presence in China for circa 60 luxury brands, including Armani, Audemars Piguet, and Moncler.
Two our curiosity, China team offers best in class, China expertise and the suite of products that has enhanced the digital presence in China for circa 60, electuary brands, including Armani or the mass be gay and Montclair.
Speaker 2: 3, we have launched this year our e-concessions as a service solution, which transforms luxury retailers into marketplaces and allows brands to streamline their distribution. If they are already one of our nearly 600 e-concessions, they can do this with minimal work.
Three we have launched this year our E concessions as a service solution, which transforms luxury retailers into marketplaces and allows brands to streamline their distribution.
If they are already one of our nearly 600 E concessions. They can do this with minimal work.
Speaker 2: The results are extraordinary and a win-win for retailers and brands, with sales from e-concessions powered by SPS for Burberry, Zenga and Brunello Cucinelli growing at Harris.com to the tune of triple digits year on year since launch.
The results are extraordinary and a win win for retailers and brands.
Sales from E concessions powered by Sps for Burberry, Zhang and Brunello Cuccinelli growing at Harrods Dot com to the tune of triple digits year on year since launch.
Speaker 2: A major milestone for this product was achieved this month with the launch of the Gucci e-Concession.
A major milestone for this progress was achieved this month with the launch of the Gucci E concession.
Speaker 2: As a result, Harrods has access to more than seven times as many Gucci SKUs as were previously available on harrods.com.
As a result, Harrods has access to more than seven times as many Gucci Skus as were previously available on Harrods Dot com looking more broadly the Tam for our marketplace, SaaS solutions, which convert retailers or even brands into marketplaces is.
Speaker 2: Looking more broadly, the temp for marketplace SaaS solutions, which convert retailers or even brands into marketplaces, is booming, with companies like Viracle reaching multi-billion dollar status.
Booming with companies like vehicle, reaching multibillion dollar status.
Speaker 2: We have a unique proposition here, as I believe we are one of the few marketplace SaaS solutions in fashion, and in my view, the only one with upscale credentials in luxury.
We have a unique proposition here as I believe we are one of the few marketplace SaaS solutions in fashion and in my view, the only one with upscale credentials in luxury.
Speaker 2: And as such, this could, stand alone, represent a very large opportunity for fire fetch in the long term.
And as such these crews stand alone represent a very large opportunity for <unk> in the long term.
Speaker 2: And, last but not least, FAR, our uniquely compelling FPS Global Payments and Logistics capabilities enable clients to sell, receive payments, and handle logistics in 190 countries out of the box.
And last but not least far our uniquely compelling Sps global payments and logistics capabilities enable clients to sell receive statements and handle logistics in 190 countries out of the box.
Speaker 2: Companies like Global E have shown the multi-billion-dollar potential of this area of the SaaS industry. I believe Farfetch has a stronger offering.
Companies like global E have shown the multibillion dollar potential of this area of the SaaS industry I believe <unk> has a stronger offering than others with unrivaled presence alliances and expertise in China, but also middle East, Russia, and Latin America markets that are.
Speaker 2: with unrivaled presence, alliances, and expertise in China, but also Middle East, Russia, and Latin America. Markets that are crucial for luxury, but also key for other fashion companies in general.
Crucial for luxury but also key for as a fashion companies in general.
Speaker 2: and in the long term we will aim at building a very sizable business out of this standalone FPS module.
And in the long term, we will aim at is building a very sizable business out of these standalone Sps module.
Speaker 2: While many of our new prospects are interested in the FPS end-to-end suite.
While many of our new prospects interested in the Sps end to end suite.
Speaker 2: Others are preferring to initiate their use of our platform by using one or more of these FPS modules, which we think is a great way to expand our offering with quicker sales cycles for the future. And each of these modules represent, I believe, a multi-billion dollar TAM on their own.
Others are preferring to initiate their use of our platform by using one or more of these lcs modules, which we think is a great way to extend our offering with quicker sales cycles for the future.
Each of these models represent I believe.
Multibillion dollar Tam on their own.
Speaker 2: In 2022, we plan to modularize our offer further, which will also allow us to broaden the appeal of these solutions, expanding from luxury to other segments of the market. Watch this space.
In 2022, we plan to Modularize, our offer further which will also allow us to broaden the appeal of these solutions expanding from luxury to other segments of the market watch this space.
Speaker 2: To summarize, I believe 2022 will be a pivotal year for our platform vision, for LNR and for FPS.
To summarize I believe 2022 will be a pivotal year for our platform vision for LNR and for Sps.
Speaker 2: There is a lot to be done and we're really in day one of this opportunity. But I continue to maintain that this platform vision expands our potential as a company in a very powerful way.
There is a lot to be done and we're really in day one of this opportunity.
I continue to maintain that this platform vision expands our potential as a company in a very powerful way.
Speaker 2: As we approach the close of the year, we are also now focused on 2022 in terms of our longer-term bets for the marketplace.
As we approach the close of the year. We are also now focused on 2022 in terms of our longer term bets for the marketplace.
Speaker 2: And I'd like to provide a preview of how I'm envisioning next year.
And I'd like to provide a preview of how I'm envisioning next year.
Speaker 2: To start, I believe we will exit 2021, and in fact, what were the hardest two years in the recent history of luxury, stronger than we've ever been.
To start I believe we will exit 2021 and in fact, what were the hazardous two years in the recent history of luxury.
Stronger than we've ever been.
Speaker 2: to kick off 2022 with incredibly powerful dynamics in all areas of our business and all regions.
To kick off 2022 with incredibly powerful dynamics in all areas of our business and all regions.
Speaker 2: I'd like to highlight three of our key strategic initiatives for 2022 that are of particular importance and expected to deliver long-term impact to the marketplace.
I'd like to highlight three of our key strategic initiatives for 2022 that are of particular importance and expected to deliver long term impact to the marketplace.
Speaker 2: First, our beauty launch is on track for next year with exciting partners to present a compelling crossover proposition to luxury consumers.
First our beauty launch is on track for next year with exciting partners to present, a compelling crossover proposition to luxury consumers.
Speaker 2: Stephanie will update you further on this initiative.
Tony will update you further on these initiatives.
Speaker 2: Second, we will be investing behind EdTech and building out our media solutions team to develop a meaningful advertising business over the next two to three years.
Second we will be investing behind Aztec and building out our media solutions team to develop a meaningful advertising business over the next two to three years.
Speaker 2: Media Solutions proceeds another record quarter in Q3, with campaigns for a wide range of brands from Prada to Margiela to Balenciaga and Mani among many others.
Media solutions posted another record quarter in Q3, we have campaigns for a wide range of brands from Prada to Marcelo to Balenciaga and many among many others.
Speaker 2: Also, we see further opportunity in working with our new beauty brand partners to enter the enormous beauty advertising market.
Also we see further opportunity in working with our new beauty brand partners to enter the enormous beauty advertising markets turn.
Speaker 2: Third, in 2022, we will double down on fulfillment by far fetch, with many initiatives to boost the volume we ship from our distribution centers in the U.S., EU, and China region. This will be a major factor in reducing our long-term logistics costs.
Third in 2022.
We'll double down on fulfillment by Farfetch with many initiatives to boost the volume we ship from our distribution centers in the U S EU and China region.
This will be a major factor in reducing our long term logistics costs and boosting our or the contribution over the next few years.
Speaker 2: and boosting our other contributions over the next few years.
Speaker 2: I will now let Stephanie update you on all things brand and customer.
I will now let Stephanie update you on all things Brandon customer.
Speaker 3: Thank you, Jose. Our ability to continue to deliver industry-leading two-year growth against a shifting market backdrop in Q3 demonstrates the strength and resilience of our business.
Thank you Sanjay.
Ability to continue to deliver industry, leading two year growth against the shifting market backdrop in Q3 demonstrates the strength and resilience of our business.
Speaker 3: Let me take you through three key areas of focus on the demand side.
Let me take you through three key areas of focus on the demand side.
Speaker 3: First, the continued strength of our high-quality customers. Secondly, our demand generation strategy in Q3. And third, our continuing brand-building efforts.
The continued strength of our high quality customized secondly, our demand generation strategy in Q3, instead of continuing brand building efforts.
Speaker 3: I'm delighted to share that in Q3, we continued to grow our customer base, growing our active consumers 31% year-over-year to 3.6 million. Crucially, this growth has delivered high-quality customers.
And to 90 to share that in Q3, we continued to grow our customer base growing our active consumer is 31% year over year to $3 6 million crucially discloses delivered high quality customers.
Speaker 3: Customers joining since Q2 2020 have, on average, exhibited higher spend per customer. In addition, customer retention is tracking ahead of 2019, and new customers have been upgrading access peers faster than their predecessors.
Customers joining since Q2 2020 have on average exhibited higher spend per customer.
In addition customer retention is tracking ahead of 2019 and new customers have been upgrading access tx faster than their predecessors.
Speaker 3: This demonstrates the benefits of our efforts around full price sales, targeted marketing and focus on personalization.
This demonstrates the benefits of our efforts around full price sales targeted marketing and focus on personalization.
Speaker 3: We are also seeing strong performance from our most valuable customer tier, our private clients, whose year-on-year GMV growth outpaced the marketplace in Q3.
We are also seeing strong performance from our most valuable customer tier our private clients, who had year on year GNP growth outpaced the marketplace in Q3.