Can Farfetch Change the Narrative Around Fashion Tech?
This week, everyone will be talking about earnings from Farfetch and Gap Inc., plus the amfAR Gala.
Running Out of Moves
- Farfetch reports first-quarter results on May 26
- The company’s stock is down more than 80 percent over the last year, mirroring declines seen across the tech sector
- Investors are concerned about online brands’ and retailers’ ability to grow and achieve profitability as consumers return to brick-and-mortar stores
Farfetch is a master at reinventing itself to ride the latest trends in online retail. But it’s having a tough time convincing investors it’s not just another pandemic stock. Like most other e-commerce companies, the luxury marketplace benefitted hugely from the boom in online retail in 2020 and 2021. Now, with consumers reverting to their pre-Covid shopping habits, Farfetch must make the case that it has a plan B.
Earlier this year, Farfetch made a high-profile push into beauty, though adding a new category doesn’t solve e-commerce’s post-pandemic problems. A $200 million investment in Neiman Marcus Group marks a major expansion of the marketplace’s ambitions to provide e-commerce services to less-wired retailers. That’s potentially a lucrative market, though the rapid decline in Shopify’s fortunes indicates running the back end of online retail is not as dynamic a business as it might have looked a year or two ago.
The Bottom Line: The real game-changer for Farfetch would be a partnership with Richemont that includes a minority investment in Yoox Net-a-Porter. Such a deal would neutralise a major competitor and open up new relationships with luxury brands. But the parties have said little about the deal since it was announced late last year. Last week, Richemont’s stock plunged after the company failed to indicate progress toward an agreement.