Farfetch Swings to Profit in FY21; Shares Up 40%

Farfetch Limited (NYSE: FTCH) shares jumped almost 40% on February 25, after the online luxury fashion retail platform reported full-year profitability at the adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) level for the first time ever.

The profitability was driven by boosted profit margins and robust Gross Merchandise Value (GMV) growth aided by an upsurge in luxury shopping.

Q4 Numbers

Farfetch reported an adjusted loss of $0.03 per share, which was in line with the street’s estimated loss.

However, revenues jumped 23% year-over-year to $666 million, but fell modestly short of consensus estimates of $676.9 million.

The top-line benefited from a surge in GMV and Digital Platform GMV, which gained 22% year-over-year to $1.3 billion and $1.1 billion, respectively.

Positively, gross margin improved 100 bps to 47.1% driven by robust margin expansion in Brand Platform, partially offset by a decrease in Digital Platform margins.

Further, the company’s adjusted EBITDA more than trebled to $36 million during the quarter, leading to the landmark first-time, full-year adjusted EBITDA of $1.6 million.

FY2022 Outlook

Looking forward, the company forecast adjusted EBITDA margin of 1% to 2% for FY2022.

Positively, the company projects Digital Platform GMV growth of 28% to 32% year-over-year, while Brand Platform GMV is expected to grow between 20% and 25% year-over-year.

CEO Comments

Commenting on the first year of profitability, Farfetch Founder and CEO, José Neves, said, “We exit the year having once again delivered market share capturing GMV growth in 2021 along with our first year of Adjusted EBITDA profitability. This positions Farfetch for an incredible 2022 focused on continuing to lead the online luxury fashion industry, growing faster than the runner-ups, and expanding profitability.”

Looking ahead into FY22, he added, “We are positioned to emerge stronger than ever, as an industry leader delivering strategic value to brand partners and an unmatched proposition for consumers.”

Wall Street’s Take

Following the Q4 results, Goldman Sachs analyst Louise Singlehurst decreased the price target on Farfetch to $45 (115.1% upside potential) from $48 and reiterated a Buy rating on the stock.

Consensus among analysts is a Strong Buy based on 10 Buys, 2 Holds and 1 Sell. The average Farfetch price target of $38.71 implies 85.04% upside potential to current levels. Shares have lost 68% over the past year.

Bloggers Weigh In

TipRanks data shows that financial blogger opinions are 100% Bullish on FTCH stock, compared to a sector average of 69%.

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