Q4 2021 Farfetch Ltd Earnings Call
Hello, and welcome to Farfetch is fourth quarter and full year 2021 conference call. Joining me today to discuss our results are Jos they never leave.
Obviously erosion Elliot 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 Hello, and welcome to Farfetch is fourth quarter actual 20 different materially from those indicated in the joining me today to discuss our results.
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.
<unk> 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 four 2021, and our annual report on form 20-F for 2021 to be filed with the SEC.
In addition, we will refer to certain financial measures not reported in accordance with ire for us on this call you can find reconciliations of these non <unk> financial measures to the ire fresh financial measures in our earnings press release, and the slide presentation, both of which are available on our website at Farfetch investors Dotcom and.
And now I'd like to turn the call over to Jeff.
Okay.
Thank you Alex and thank you all for joining us today.
I will provide a brief review of 2021 before discussing how we see 2022 and beyond develop across our platform marketplaces and brand platform.
Over the course of the cohesion, 19th antennae selectively industry has once again proven its resilience with most luxury houses reporting 2020, while revenues in both 2019 levels.
Yes.
During this time the secular trends of the move from offline to online also accelerated.
And we believe this shift is permanent.
With digital sales mix expected to grow from an estimated 22% in 2021% to 30% by 2020 fives as the leading global plasma collection <unk>, we see tremendous growth ahead for passage.
Okay.
We exited 2021 with a business almost double the size in G M P as compared to 2019.
This is on top of the ambitious targets, we have been delivering on as we've exceeded our targeted 30% CAGR in each year since our 2018 IPO and we expect to continue delivering on this targeted CAGR through 2022.
I believe this is absolutely remarkable and unrivaled in the luxury industry at our scale.
In achieving this strong growth. We also stay disciplined as we navigated many external headwinds, including digital services taxes.
And the greater than expected impact of Brexit inflationary pressures across our cost base and.
And idea phage.
The full cost of these amounted to tens of millions of dollars in 2021.
Yes.
This focused execution resulted in an expansion of our adjusted EBITDA profitability.
And I am delighted to share class has achieved a historical milestone with our first full year of profitability at the adjusted EBITA level following a decade of strong growth and Reinvestments.
Deals what is today, the leading global platform for the luxury fashion industry.
Okay.
But what makes US most proud is the fact that we stood by our global fashion community supporting our partners right from the start of the pandemic via initiatives such as our hashtag subpar boutiques campaign and leveraging our platform to enable the continuity of their businesses.
While there are other channels were available.
To have with priorities that farfetch is a crucial channel.
Clearly souls, who after the impressive enterprises.
Rising the very core of our mission to be the connector between curators creators and the global community of session levels.
Okay.
We emerge from this pandemic stronger than ever and in process file an industry leader with more strategic brand relationships.
And then unmatched proposition for consumers.
Our marketplace business is also healthier than in 2019.
Like many luxury groups, we have taken the last two years as an opportunity to shift our business increasingly to full price sales away from marathon.
This has been a deliberate strategy stages clearly buyers in 2019 and executed brilliantly as we've reported over 30% annual growth, even as we transitioned to a slower growth of markdown products.
In Q4, 2021 full price GMT grows significantly exceeded overall digital platforms him. He grows at 33% year on year.
And when the handsets and 18% on the TUI effects.
Mark down by contrast grew mid single digits in Q4.
And two year full price GMT growth for full year 2021.
A staggering five times as fast as markdowns GMP.
Okay.
As always we take a long term view and operate in alignment with luxury brands and have supportive menu brand strategy is to move to full price only.
Of the top 10 brands on our marketplace five now follow a full price strategy for their re concessions.
And our our own ground fashion Dot Com has eliminated all markdown sales for over one year and is now a 100% full price escalation.
In 2022, we expect to continue to deliver market share capturing digital platform CMG growth.
While executing on our strategy to continue driving a much larger full price mix towards an even healthier business.
With that I would like to turn our focus to our long term opportunities across our platform our marketplace and our brand platform in pursuing our mission to be the global platform for luxury.
First our platform in 2021, we made significant strides in our platform capabilities.
<unk> expanding our E concessions as a service model, which Harris as leverage to significantly increase the number of studios. They can offer from Gucci Burberry Brunello Cuccinelli on Sanger.
And announcing plans for the JV with <unk> logistics to build out our fulfillment by Farfetch proposition and offer a dedicated fulfillment solutions further bravo luxury industry.
And with respect to connected retail, where we continue to expand with Chanel, Tom Brown in Brown fashion with further broadens it feels caves via our boutiques pilots that enables online to offline activations for our boutique partners.
And signed on to design future retail experiences for our Matterazzo and Santana new luxury retail these elements in Sao Paolo and though respectively.
Over the last six months. We've also requires three small but exciting tech businesses aimed at further cementing us as the platform for the industry chatty looks disease and Alere.
He is bringing to bear our respective capabilities in marketplace as a service technology.
To be expertise for luxury resale and the virtual creation of higher quality on marvell images.
This significant momentum behind our platform in combination with the fact that the industry has really taken notice of the unique capabilities of the <unk> platform at the time when large companies are once again opened two significant technology partnerships to bolster their digital capabilities leaves me.
To feel increasingly confident that 2022 will be a transformational year for Sps.
I want to spend a moment on the previously disclosed discussions really small.
Following our announcement on November 12, 2021 fast ACH remains in discussions with <unk> about the potential expansion of our existing luxury new retail strategic partnerships.
We're continuing to discuss a potential deal which includes the leveraging of Farfetch platform solutions.
Our <unk> model's mesons and <unk> <unk>.
Participation of the smallest marathons in fast ACH is marketplace.
And our minority investment in <unk> by passage.
However, there can be no guarantee that we will be able to sign this deal or any of the options under consideration.
We will make further announcements if and when refiners.
In parallel we are also in discussions on several other enterprise raise Sps deals in our exciting pipeline.
Watch this space.
Turning now to the marketplace.
While it is the largest global destination for online luxury fashion.
Within the Grand scheme of the $300 billion luxury industry, the marketplace represents less than 2% share of the personal luxury goods market.
And we see significant growth potential behind this business.
This incredible growth potential is also broad based geographically.
As we have a presence and then to be a leader in all major luxury markets in the world.
The U S. Our largest market continues to be a huge opportunity an area of focus.
In 2021 U S performed very well growing above the average of our marketplace driven by our arrival luxury range, which is especially appealing to the sophisticated American luxury consumer.
In 2021, we also continues to gain customers and grow mainland China Gmg ahead of the massive place predominantly through our appropriate aerie apps. Although we are pleased to share that less than one year into our launch on tmall, our newest channel already represents more than 10%.
Of 2021 CMV in these markets.
Our strong performance in China and has caused the differentiation we offer through our cross border supply.
Making available brands that are not readily available in China.
This is an advantage that we plan to lean into.
Equally in 2022, when international travel options out of China.
Expect it to remain limited.
Our third leg of our platform strategy is with the new guidance our brand platform.
New gas has a history of exciting collaborations.
Including creating one of nike's, most powerful collaborations ever Nike off right.
They are one of the few teams who have the DNA to bring a crossover of luxury and Sparks to life.
We are tremendously excited about new gas recent addition of reebok to risk portfolio.
Via an agreement with our authentic brands group AVG to become the exclusive partner to create curated and bring to market luxury collaborations.
Upon their announced acquisition of the brand.
As well as our car operating partner for a rebound across Europe .
And distributor for older brands premium lines in over 50 countries, including U S, Canada and most of Europe .
Reebok has an incredible heritage.
And we have developed a fantastic repower with APG.
We will have a very strong strategy to reignite this iconic brand.
The addition of the Reebok premium exclusive license is also double down on our strategy for new grads to create significant buzz and organic traffic to the passage marketplace as.
As well as additional business for Sps, which will power the digital sales and these licenses.
As we approach the three year anniversary of new pads acquisition.
This strategy has been tremendously beneficial to passage.
As well as the individual brands themselves.
With direct to consumer sales on Factset channels growing from 2% of <unk> revenues at acquisition to be by far the largest single channel for these brands to reach consumers globally.
On the 28th of February New gas will stage, a celebratory of wide show in Paris fashion week, hollering virtual or blues unique contribution to the history of fashion.
I will now hand over to Stephanie to update you on all things brand and customer Stephanie.
Thank you Sheng and Hello, everyone. It's great to speak with you all today and give you an update on our progress on the demand side by market pay technology.
Over the past two years, we have acquired on average 500000, new active consumers each quarter and as we remain focused on retaining these customers I'm pleased to share that in Q4 of 2021, we continue to see improved retention compared to 2019 levels.
Our access loyalty program provides a framework for us to build a strong relationship with our customers and in 2021, we saw customers upgrading chairs at a higher rate as compared to 2020 and as customers move up the tiers, we see increased average order values frequency and retention all the way up Thomas valuable.
<unk> our private clients.
As we aim to continue to improve retention some of our core initiatives are centered around leveraging our first party data for our continued focus on personalization, including pipelines communications, which has delivered a conversion rate, 50% higher noncash slide messages over the past few quarters.
And we are also increasing access loyalty program engagement during early stages of the consumer lifecycle to drive repurchase rates, which have a high correlation with customer retention.
More generally I would like to spend some time today outlining three main areas of focus for 2022 on the customer front.
Firstly, driving a balanced and efficient approach to performance marketing and brand investments.
Secondly, driving advertising sales by our media solutions business unit and thirdly, the launch of beauty.
Starting with our approach to marketing.
We want to be the most loved brand in the industry, having an emotional connection with our existing audience and acquiring new customers by playing to our own neon farfetch strength around choice global community, a millennial Gen Z customer base and at the market place our ability to serve multiple points of view and stay on the leading edge of innovation.
To do that we continue to implement a full funnel marketing strategy, combining our performance marketing expertise with mid and upper funnel brand building activity.
This strategy has delivered our highest ever brand preference and consideration in Q4 of 2021.
And this is also reflected in the partnerships with brands, who see us as a preferred marketing partner for product launches and exclusives, leveraging our editorial positioning our global reach and access to multiple channels in China, and our innovation capabilities, thus, creating a flywheel between our Senate brand and our customers get.
Yesterday, we partnered with balanced yoga to be their exclusive global multi brand channel for the highly anticipated easy gap engineered by balance Yoga collection with.
We're thrilled to be able to offer this much hyped collab to farfetch consumers around the world, including in China, where we also launched the connection on Tmall <unk>.
These partnerships are as important as ever as the digital marketing landscape is changing and we see the importance of balancing paid traffic with organic traffic generating initiatives.
On our last call. We discuss these changes in the digital marketing landscape, including challenges related to IBSA and laid out the initiatives. We are taking to mitigate these headwinds and as we had expected. These actions drove a sequential recovery in demand generation to 21% of digital platform services revenue in Q4.
An improvement from 23% in Q3 2021.
Specifically, we have continued to develop and enhance our digital marketing capabilities, leveraging our <unk> data and tech resources to drive efficiencies across multiple channels broadening our lower funnel channels and increasing our investment in mid funnel activity.
In 2022, we plan to continue this approach to marketing focused on being top of mind across different customer touch points with both paid and non paid activity.
<unk> also leveraging our media solutions capabilities and brand partnerships, which in themselves provide valuable marketing moments to the customer.
This leads me to the secondary focus for 2020, Q advertising <unk> solutions.
As luxury brands increasingly recognized a one P data capabilities and the value of our relevant community of luxury fashion shoppers media solutions continued to gain traction in 2021.
Throughout the year, we sell campaigns for a diverse mix of over 85 partners, including brands, such as Gucci, and Prada, which run multiple campaigns.
These campaigns customers able to engage and interact with their favorite brands, while our partners amplify the reach and success of their connections with one of our recent campaigns delivering a total reach of over 20 million visitors more than double the monthly traffic estimated for some major brand dotcom sites.
As an example of how brands leverage our innovation and editorial capability in Q4, we partnered with Netflix and down there on the launch of that capture collection for the release of the movie the Hydro deferral, which was exclusively launched on the Farfetch marketplace, Netflix shop and demand direct channels. The campaign included social content featuring <unk>.
Visuals woven into the recreation of the movie set pieces combined with editorial elements highlighting the limited edition demand connection.
<unk> and a 66% uplift inbound map product listing page views during the campaign period. Additionally.
8% of campaign flex where for new to about my visitors with an average order value of more than $950 around 50% higher than our marketplace average.
This year, we will continue to manage our media solutions business investing in developing our AD tech and programmatic capabilities, which will allow us to further scale our AD inventory paving the way for media solutions to become a more material part of our business.
Finally on beauty, we remain on track to launch this category on the Farfetch marketplace. In Q2, we will take a unique approach to beauty for both supply partners and customers of offering a differentiated experience and a curated offering.
You will have read in the ramp up to this launch we recently announced the acquisition of violent grade, which will bring industry authority as well as a curated collection of products to the market pace.
Finally creates a coup safeway PT destination with elevated content, which is delta devoted community, who trust and love the brand for its expertise.
Our overall strategy for this new category is to partner with beauty brand to an E concession model, which differentiate us from other multi brand online channels and aligns well with brands own direct to consumer strategy.
Combining this with our <unk> business by brands and by the way as well as exclusive supply for new guidance, we'll be able to offer a relevant mix of both lie to established and indie brands.
Our expansion into BHG will also provide brands and opportunity to reach our audience. It's tens of millions of targeted luxury visitors to co branding and advertising sales opportunities.
And now I'll hand, the call over to Elliot to discuss our financial results and outlook.
Thank you Stephanie and Hello to you all is good to speak with you today.
To share with you the key points from our Q4 2021 financial performance a quarter that demonstrates our overall strength leadership within the industry and our ability to quickly adapt to a changing environments.
Before looking at Q4 in detail I would like to summarize the 2021 full year position, we achieved profitability at the adjusted EBITDA level across 2021, as a whole, making 2021, a milestone year for farfetch.
We added over $1 billion in GM V to deliver $4 3 billion of group GMP in 2021.
Leaving 33% growth over 2020, and driving 35% growth in revenue.
Our operating expenses, which include G&A and technology expense increased 17% compared to 2020 half the rate of growth in revenue achieving significant scale and leverage and moving the group into full year adjusted EBITDA profitability for the first time.
In terms of fourth quarter 2021, we delivered group <unk> of $1 3 billion, an increase of 23% year on year.
Adjusted revenue of $571 million, an increase of 23% year on year.
Gross margins of 47% 95 basis points above the prior year quarter, and adjusted EBITDA profitability of $36 million versus $10 million in Q4 2020.
These results reflect strong performance across all three business segments.
First with Enel digital platform <unk> was $1 1 billion, an increase of 23% year on year or 83% compared to 2019 as we continue to make significant share gains within the overall luxury industry.
Most importantly, our <unk>.
<unk> platform powered $891 million of.
Third party GMB up 23% year on year, which is an acceleration on growth from Q3.
<unk> generated $271 million of revenue.
Clarity, 0.4% type rate.
A 160 basis points year on year increase which contributed to the 100 basis points year on year increase in third party gross margin to 67%.
<unk> from third party transactions on the platform grew 16% year on year to $161 million as we started to refocus first party original towards a full price offering rather than attracting sales from higher levels of markdowns that were in place in Q4 2020.
And we delivered growth from Browns in line with the overall marketplace.
First party gross margin decreased to 30%.
Stock clearance activity.
Performance <unk> increased 26%.
Outpacing overall, GMB growth, reflecting a higher pass through to consumers of shipping and <unk> costs.
These costs to Ross reported a <unk> cost.
Cost of revenue increased 19% year on year.
The revenue growth sorry, the higher growth in revenue versus the growth in costs represents the first time in several quarters that we have been able to reduce rather than increase our investment in subsidized free shipping improving our recovery on these costs.
Our platform gross margins.
Digital platform order contribution margin increased 580 basis points between Q3, and Q4 to 33, 4% for the quarter.
Reflecting several initiatives taken to improve profitability in the quarter and the years ahead.
First we updated consumer shipping rates and free shipping policies to reflect the cost inflation, we have seen over the past year as well as sharing shipping and packaging cost increases with our sellers.
Second we implemented measures to address recent changes in the digital marketing landscape.
As a result demand generation as a percentage of digital platform services revenue was 21%.
236 basis points sequential improvement from Q3 dollars 21.
We continue to benchmark strongly on our lifetime value over customer acquisition cost ratios and I'm pleased to report that the Q2 'twenty one cohort of customers has recovered its initial acquisition spend within the first six months.
Additionally, we have successfully renegotiated increased commissions to reflate, the inflationary environment with circa 65% of our brand E concession partners and those brands have not only remained on the platform, but also increase the spring summer supply by more than 100%.
Year on year.
In recognition of the unique value and attractive audience.
<unk> delivers towards their own digital strategies.
The financial impact of this increased commissions will be phased in throughout 2022.
The farfetch marketplace, which accounts for the bulk of Dnb on the digital platform accelerated its year on year growth compared to Q3 on the back of our unparalleled third party stock position and strong growth across a number of our key luxury markets.
Brian platform revenue grew 13% year on year to $117 million.
This was below expectations due to shipment delays we experienced in December .
<unk> was the fastest growing brand in terms of delivered wholesale orders in Q4, and now accounts for just under 30% of brand platform revenue.
Red platform gross margin was particularly strong in Q4 up 59%.
This reflects a higher mix of Palm Angels revenue and the fact that we no longer recognize royalties on this brand and cost of revenues. Following our acquisition of 60% of the brand company as well as one time benefits from cost recovery on current season collections and rebates from manufacturers in relation to ship.
The lies and production volumes.
Our third segment and store physical retail generated revenue growth of 64% year on year to $23 million.
And gross profit of $14 million at a margin of 63%.
Driven by an expansion of our higher margin New guards store network.
Okay.
The impressive <unk> and revenue growth across the group in Q4 'twenty. One was achieved with just 9% year on year growth in our operating expense base, which resulted in 410 basis points of operating cost leverage when compared to Q4 2020.
When looking back over the last two years, we see the investments in our technology and operational platforms have paid off and enabled us to nearly double group GMB against 68% growth in operating expenses over the same time periods.
I'm happy to report a successful quarter and a successful year, which allows us to now focus on our outlook for 2022.
At this point, it's worth reminding everyone that our mission is to be the platform for the global luxury market.
Our long term financial strategy has been to maximize our share of the $300 billion in silos within this market each year.
Compounding GMB growth of 30% per annum strengthening unit economics, and expanding our EBITDA margins.
The strategy has been in place since our IPO and remains unchanged.
Executing on this strategy and delivering steady progress towards this mission over the medium term is what motivates us and sits how we run our business.
Moving forward, we will align our guidance to this strategy focusing our forward looking statements on our annual targets rather than our quarterly outlook.
We believe conversations with shareholders, who will be more productive as they are better matched with the way, we operate and execute the business.
As such looking at the year ahead, we expect to see continued growth in digital platform GMB of 28% to 33% for continued market share capture.
GMB growth will be lower in the first half.
Q1, we are comping against 60% growth from Q1 2021.
Which was achieved due to a boost from first time adoption of consumers to phosphates during COVID-19, lockdowns and the incoming to trade from Harrods in its first full year as our platform clients.
Growth from this partner became like for likes from Q2 2021.
GMB growth on the brand platform is expected at 20% to 25% in 2022.
We expect to see an improvement in unit economics over 2021 levels with digital platform order contribution margin in the range of 33% to 35% driven Baja tight credits on the platform and lower cost overall in relation to customer engagement and retention.
Brian platform gross margins are expected at 50% to 52%.
We expect 2022 operating cost to continue to grow slower than adjusted revenue achieving further operating cost leverage. This is despite a reimbursement of a proportion of brand platform profitability into important brand building activities, including <unk>.
Seasonal campaign initiatives, including our hotly anticipated.
Anticipated <unk> in Milan, and Paris in the coming weeks.
Operating costs are expected to decline from 38% of adjusted revenue in 2021% to 35% to 37% of adjusted revenue in 2022.
And therefore and balancing growth investment and overall profitability, we expect to see a further increase in adjusted EBITA margins to 1% to 3% in 2022.
I look forward to speaking to you in May to update you on our progress towards these very exciting financial goals.
Sorry, sorry.
Thank you Elliot the Q4 numbers clearly show the strong momentum.
And our mission to be the global platform collapsing.
As we enter a post pandemic environment.
During these last two years the luxury industry proceeds resilience.
And we continued to execute on our strategy.
As we transition to a new normal in 2020 tool.
The largest global destination for luxury fashion.
And are growing faster than the runner ups.
<unk> market share.
And profitably so.
All of this growth is even more impressive in light of our strategy to favor a full price strategy.
Shrink the markdown needs of our business significantly.
With 2021, demonstrating our execution of our path to profitability.
We now look forward to 2022 and beyond as a period of expected EBITDA margin expansion.
All in all we are looking at 2022 from a position of incredible strengths.
<unk> is a secular winner in a multi hundred billion dollar opportunity with.
We're still just in the early innings of this exciting journey.
I want to take this opportunity to thank all processes for continuing to build this incredible company.
And now the team and I will be happy to take your questions.
Okay.
Thank you if you'd like to ask a question. Please press star one on your telephone keypad and if for any reason you'd like to remove that question. Please press star two as a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking your question.
We will now take our first question from the line of Lauren Chung of Morgan Stanley .
Lauren you May proceed.
Great. Thanks, so much.
I guess bigger picture I think there was a lot of fear heading into the release today that that you'd have to walk away from your long term target of 30% annual GMB growth. It looks like you're on track to achieve that this year, but could you maybe discuss if theres been any change in how you're thinking about the medium to long term targets or goals of the business.
And then sort of near term for 2022 is there any way you can help us think about the contribution assumed from beauty from Tmall any other new partnerships you may have thanks, so much.
Thank you Lauren.
Look I think first of all.
This is an incredible.
Secular growth opportunity right. This is a $300 billion industry.
Very resilient recovering in two years and already back to growth.
This is going to be a $500 billion industry into the next few years, it's still very underpenetrated, even after COVID-19 . So we're talking 23% online penetration.
Slower than other apparel and other categories.
This is going to change and grow to 30% plus by 2025 and.
And with a leading platform. So this is a tremendous opportunity for growth for many many years to come.
We always said with our IPO that the target was to grow at 30%.
Of course this needs to be seen.
In terms of three year CAGR through this period.
But I think what is.
Absolutely extraordinary is that.
We exit 2021 with some momentum we have 2021, which was great.
Our business is twice the size as well as in 2019 in terms of CMV.
We ended the year with 33% growth.
Achieving profitability.
And then this is.
Whilst we were executing on.
Transition to.
Two a full price store.
<unk> that we announced in 2019.
To give you an idea just in Q4.
Full price grew at 33%.
And full price grew 118% on a real estate right. So these are very very strong.
<unk>.
Growth rates.
And we're therefore are very very confident about 2022.
You've touched on multiple vectors of growth.
We have beauty coming.
Have what I think is going to be a transformational year for Sps.
We have obviously the announcement for.
The Reebok license, which is still in a transition period in 2022.
From added us to ABC in NCG.
But in 2023 is a multi hundred million dollar business that we're going to add to the energy portfolio.
We're building.
Stephanie talked about media solutions very very exciting we're building multiple multiple multiple layers of growth in this business and thats not just for 2022 as far as the medium and the long term right. So we're.
We look at our business.
In years, and we are executing on this strategy, which is a strategy of capturing market share.
And now with expanding levels of positive EBITDA profitability. So.
So again, we're coming into 2022 from a position of incredible strengths.
Okay.
Thank you Lauren our next question is from Luca <unk> of Bernstein with Barclays.
Please proceed with your question.
Yes, thank you very much.
One question about your logistics architect.
Going to the mortgage points architecture.
<unk> been using since to stop every W. Wildwood coed transportation costs.
This is because the number of items that you can trend in the same box probably lower.
Awesome.
The regional or central warehouse.
I wonder whether it be with you.
Theory.
In the case of scrubbing comfortable with.
The plane needs for example.
What are you doing and what can you do to offset this issue. Thank you.
Sure.
Hi, Luca.
It's.
Great.
Question and in fact, a great opportunity for passage for me, that's that's a glass half full.
Good question.
Our our very agile distribution model has served us well and continues to serve us well, allowing us to have.
Between five to 10 times, the SKU count of our competitors.
Without any additional risk for the boutiques and the brands that we expect on the platform. It allows us to offer a super fast delivery. We have same day delivery in 2000 cities to give you an idea none of our competitors can even matched anywhere close that.
It allows us to we're just launched recently a pilots.
<unk> retail pilot, where we can direct customers to nearby stores. So this this is a tremendous innovation that we're bringing into this industry.
Having said that you correctly point out too.
Through efficiencies and cost efficiencies and that's in fact, a huge opportunity for all of the contribution and we are absolutely laser focused on that.
Essentially two ways to optimize.
Or the contribution to logistics level.
The first is developing local supply we're in major territories, where our customers are.
We have been very successful at that we are now shipping from 50 countries.
Brands like proud of for example, given idea has 77 zero inventory bonds that were connected to in Brazil in Tokyo in <unk>.
Several cities in the last several cities in Europe .
China etcetera.
And this is as an example, so.
Either super brands have dozens of inventory bonds as well.
And this obviously means that we are.
In this case shipping in a much more cost efficient way.
And the other big bet is fulfillment by Farfetch. So this is.
The Great News is this is now being used by.
Measure Super brands.
For the likes of the carrying group all the brands and the carrying group now.
But also Montclair.
<unk>.
Valentino.
They are now consigning and being fulfilled by.
Our our network of warehouses globally.
So this is obviously the starting point and we're developing that steps with those brands.
Beauty is a new category that will be 100% fulfillment by Farfetch, so 100% size items in one single box we are buying.
And.
And obviously you've seen the partnership with <unk>, which is very exciting allows us to scale without investing our own capex scales.
Scale very fast.
Space available in the multiple locations, we are and also add new locations in a very scalable way so expect in the future.
Greater efficiencies on another contribution line coming from from these initiatives.
Also as continuing to leverage what is an incredible innovation in this industry.
And when that is inspiring many other industries youll see these super fast delivery services Theyre like absolutely.
Incredibly popular with customers and this is only possible when you have a multipoint to multipoint. That's the hard thing to do so with cracks are happening and now we have an incredible opportunity in terms of upside on profitability. Thank you.
Thank you Luca our next question is from Louise single Hurst of Goldman Sachs. Luis Please proceed.
Hi, Good evening, everyone. Thank you very much for the details.
Three questions if I may firstly.
Thank you Jason.
Soundbite in terms of the customer loyalty I, just wonder when we're trying to reconcile the net.
We're talking about in terms of the Grace period, I think you mentioned about 500000.
Cool.
Okay.
The exit rate or the churn rate of customer discounting if I'm not mistaken I wonder if you could just help us think about what that means going forward of the care levels should normalize now annualizing.
Hey, David.
David.
Is it possible to give us any metrics around that.
You're seeing in terms of customer loyalty people migrating from brown.
<unk> to the high teens.
And the loyalty and then my second question if I could.
Yeah. This is Mcdonald's to the outlook for full year 2018.
You mentioned about the <unk>.
Thank you Juan.
Dnb, Greg I think the consensus is around 25%.
I presume from the comments, we should definitely be looking at Greg White.
Ron in the guide given that tough comp, but I wonder if you can make any comments with regards to around that Q1 level.
And then my final.
If I could ask a question. Please with regards to China, we haven't had that much detail since the JV can.
Can you just kind of.
Where you see the business.
Perfect. Thanks for the JV in China relative to your expectations.
The business to be at this point in time.
Thank you.
Hi, Denise.
<unk> your question, which overall is on the topic as they can.
<unk>, which as you can imagine has always been a focus for us at Farfetch that particularly of course, given the very high number of customers was acquired.
Over the past few years and we're very happy we're exiting 2021 with a retention rate that is above at 2019.
To all the efforts we have implemented.
Over the past year and in fact, if you look at our active customized.
We've increased that year on year by 22%, which is in line with growth. So we're really happy with that number and really entering 2022 with strong momentum and confidence that some of the initiatives. We're working on and are working and that and we will refine those and see some of those initiatives you mentioned access.
Really leveraging our access program, it's a wonderful framework through which we can talk to you at our customized and yeah, and it's a way for us to really think about how we migrate customers off the PFS and we have seen customers migrating faster uptick in in 2021 .
We are looking at getting those customers into access Q&A. So we've really looked closely this year and we'll continue to look at our lifecycle program. So really a more robust welcome program.
And are able to speak to them and EMEA and our interaction with Farfetch and really drive that.
That repurchase space, which is that in a very early indicator.
As I mentioned, we're also working on a personalization.
To drive this or it is the customers and we really think about precipitation intensive dose.
Product based wireless.
Surrounding E&S or what you have on your wish list.
Around particularly affected by when you've already engaged the customer in terms of Apache and already making keeping them updated on on tracking their parcel we find that that works very well to get them right back and purchasing again.
But we're also thinking about.
Behavioral matches around how do we really get customized Q.
To buy into a little bit more to move them up the tiers and share them at the.
Benefit so E mail.
Never one answer it's the whole suite of solutions and <unk> and we're seeing.
And how those work and have worked for 2021 and into 'twenty. Two and then of course beauty is something that we've really thought about in the context of.
Our retention beauty as an amazing opportunity to talk to a customer to have more frequent interactions with them not only of course to bring in a new customer, but it allows us to capture a larger share of wallet from.
Our existing customers and really increased their frequency, so lots happening there and jam.
In a big continued focus for <unk>.
Salaries your accretion of our outlook.
Going to be drawn on the guidance.
<unk> to say as you touched on.
We obviously saw a very strong.
Year on year growth last year in Q1, and 60% in Q2, 40% and then obviously the second half of the year was 22, 23% year on year growth.
The digital platform in terms of <unk>.
So overall I will say is that as I said earlier on we are expecting lower year on year growth across <unk> and the growth rates will obviously build throughout the year as we start to annualize those.
Comps from 2021.
Yes.
Hi, Louise on China.
<unk>.
Really really happy with the JV and so our Pappas Alibaba is small.
The JV has.
A target an internal target, which I'm delighted to share detail already.
And we.
We always said that we expected this to be a meaningful channel for our business in mainland China.
It's now about 10% of our <unk> for their territory.
We're not going to break it out.
Martin This is we never breakout channels, but.
I think it's important to celebrate the success in less than one year. After after we launched.
We're seeing it as a very incremental channel actually through the <unk> App in China.
A channel that reaches to tier two tier three cities.
We're seeing the mix of brands that is customers are buying.
And skews towards interesting niche smaller brands.
Which is very interesting to see the <unk>, although lower than the very high <unk>, China is a country, where we have enabled.
At superior to the to the $600 that we have globally give or take.
On T Mo is a bit lower but it's clearly a luxury customer that is that is shopping our CMO channel and.
We're seeing already.
Many fans many followers.
And were obviously leveraging <unk> capabilities in terms of land stream live streaming and in brand awareness.
To create more hype around with the fast ACH destination in China. So all around a tremendous success in the first year.
And.
A very heavy partnership.
And.
We are looking forward to further innovation.
As we have already announced we're working with Alibaba on a retail lab to bring luxury new retail connected retail.
<unk> China.
Watch the space.
Some really cool interesting concepts that we're working.
Working on and.
And we're very bullish.
On the whole China opportunity as I said before thank.
Thank you.
Thank you Luis our next question comes from the line of Ike.
For a child of Wells Fargo.
Please proceed.
Thank you so much just a couple for me.
I guess just.
Stick with China, 10%.
Phil.
I am Joe Davis.
Target where longer term do you think that that percentage should reach it was kind of curious.
Yes.
Ultimately it could be as a percent of regional sales and then maybe for Elliot on the Reebok partnership.
Quantify the revenue stream of the partnership.
It sounds like Youre getting.
Revenue over Europe , and certain luxury drops in North America.
But that should be a pretty meaningful revenue stream for you.
Is that embedded in the 20%, 25% brand platform growth for us got it.
Up there because you are not it is not currently in the P&L today.
Hi, so on.
China as I said.
And to everyone on the call and we're extremely happy with the results from the TMO Star for US. What's important is not is not essentially the mix. The importance for me I always say I don't care about mixes out every dollar out there.
In all channels.
And and.
We are growing.
Very fast our fast that China, app, our appropriate dairy app, we have six centers.
Boots on the ground, where the only western company really localizing.
Really localizing the experience these people.
The majority are engineers online market he is proud.
Correct.
And.
And highly specialized.
E Commerce experts.
That we have in our China team.
So the China App is going to continue to grow and.
And capture market share as a very unique position, we have I think unique among the other western.
Companies in the luxury space and the Tmall channel I think what's great is that its incremental right. I mean, we're seeing we are reaching customers in tier two tier three cities.
Otherwise, we'll probably was enriched with our app.
We are seeing traction in categories and brands that are different from the ones. We've seen the absolute so we see incremental lift in both channels. So the idea is really to develop both to their maximum.
And maybe it may be and also have the time I'll handle first call. After the following town you will be equal to the other participants.
Yes.
We'll touch on the Reebok opportunity. So there is a transition period, so reebok and additives day.
They are about to complete.
The acquisition I think in the.
<unk>.
And.
Of course upon that we have scientists exclusive license.
The premium collapsed the premium.
<unk> issues and archive.
So the luxury space globally as.
As well as our call our partnerships our distribution in Europe for four older rebar clients. So.
So in 'twenty two 'twenty three post transition is a multi hundred million dollar opportunity.
<unk> and fast ACH a.
A very high percentage is already online.
Direct to consumer digital channels in.
In group's asset style with our <unk> once we once we take over as we deal with engineers you went from 2%.
<unk> direct to 20% online directly in less than three years, we plan to do the same with Reebok with growth of the of the digital capabilities through Sps.
We're going to bring more direct to consumer digital sales tool.
That business.
And we have the DNA because.
We've launched not just Nike offline, which is perhaps the most successful market collaboration but also many others with ambush and with with many other.
Projects under the energy portfolio.
This year.
It's what we've included in the guidance is a fraction of the numbers I'm talking about.
So its really a transition year, where we will be working already.
The collections on the products on the plants a lot of work so that we hit the ground running.
In the beginning of 2023.
Obviously with steel smaller impact this year.
Okay.
Thanks, very much J J and thanks, everyone for joining US today, we look forward to speaking to you.
Okay.
Very much J J and thanks, everyone for joining US today, we look forward to speaking to you next quarter to discuss our Q1 results.