The Deficit Has Finally Narrowed Down, And Farfetch Will Begin To Make Profits In 2021.

Farfetch announced last Thursday that its third quarter loss was less than expected, and confirmed for the first time that the company will reach a balance in 2021.
The post tax loss of the luxury electronic business platform is $85 million 500 thousand, lower than the US $89 million 600 thousand in the second quarter of this year, and the "order contribution margin" used to reflect marketing and customer acquisition costs rose to 28% from 28% in the previous quarter.
YAHOO's data show that Farfetch's third quarter revenue increased 90% to $255 million compared to the same period last year, higher than analysts' average forecast of $244 million. They also expect to lose 37 cents per share - the Farfetch report shows a real loss of 28 cents. The total value of goods, that is, sales of goods received through the platform, reached $420 million, a year-on-year increase of 40% over fixed exchange rates.
Its share price surged 20% to 8.98 dollars in after hours trading.
Farfetch founder Jose Neves has looked at how to win the largest share of the luxury online shopping market, which often confuses analysts who are more concerned about profitability. As an integrated e-commerce platform for all boutiques and branded products, the company has acquired many companies since its listing in September 2018, and has gained a larger market share through promotion.
Analysts are increasingly concerned about the health of the company in the short and medium term, especially in recent quarters. After buying the New Guards Group of Off-White and Heron Preston's parent company in August for $675 million, Farfetch's share price has fallen by more than half.
Last Thursday, Neves and Elliot Jordan, chief financial officer, said that the third quarter's losses were reduced as companies reduced their sales promotions. Data from Bernstein research company (Bernstein) showed that the average discount level of Farfetch in the first half of November was 17%, which improved compared with 20% in September, while rival Net-a-Porter did not discount at that time.
They said that such a fall did not have a negative impact on sales, because those preferences mainly attracted people who were shopping on the platform for the first time. On the contrary, Farfetch also provides discounts and incentives for more frequent and higher value shoppers. At present, the average order value is US $582, compared with us $585 in the same period last year.
The new New Guards Group is also helping Farfetch achieve profitability, creating a revenue of $63 million in the third quarter and a profit of $27 million. As a whole, the brand of the group sells more products on Farfetch than anywhere else. The Group expects revenues to be between $80 million and $90 million next quarter.
Executives also provided the date of the company's possible profitability. In response to an analyst's question, Jordan said that "2021 seems to be the point of time for us to break even."
Some analysts believe that there is still a long way to go for Farfetch to achieve profitability. Bernstein analyst Luca Solca predicted earlier last week that the company may need to raise funds by the end of the year. Jordan said on Thursday that the company still had $300 million guaranteed loan commitments unfulfilled.
In a report released before the earnings announcement, Bernstein lowered the stock rating of Farfetch to "poor performance" and predicted that its share price would fall by 51% to 4 dollars.
"Farfetch is not Uber in the field of luxury distribution. Most valuable luxury brands already own their own luxury cars, namely their own stores and websites," Luca wrote in the report. "This industry needs more localized services. This is not obvious - it needs pure multi brand digital retailers.
Neves said that in the last quarter, the stock of the top ten brands in the market has more than doubled. He predicts that more and more luxury brands will sell products through Farfetch's "electronic preferences" or sell them directly on the platform instead of selling products through their store networks, and they will also leave some online batch platforms that are difficult to control and promote.
"I think the final result will be very beneficial to Farfetch," he told analysts. "Brands will have to protect the integrity of product prices and preserve the integrity of sales promotion. Online wholesale channels do not allow them to do so. Now they have a larger alternative. We obviously don't know how long it will take to complete the transformation. But all of these developments show that we will be the big winners.