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During Milan and Paris Fashion Week, everybody was talking about Farfetch. The company’s stock market value collapse and mounting losses have become major sources of concern. More than 500 Italian boutiques depend on Farfetch’s marketplace to offload stock and many brands and department stores such as Harrods and Bergdorf Goodman use its proprietary technology for their online business.

When it was launched in 2008, the London-based company aimed to revolutionize online retail and help fashion embrace the new digital world order. Today, it’s the fashion and luxury industry that needs to help it and some major players such as Richemont.

In three years, Farfetch’s stock market value has plunged from a high of $21.6 billion to $574 million. A spectacular drop. And the share price seems to be continuing to fall. “The drop in share price is what is driving the narrative around the company now,” said the head of an investment fund that believed in Farfetch many years ago and still has a sizeable stake.

This month, Forbes ranked Farfetch No. 1 on the list of potential retail bankruptcies this year. Several CEOs and managers of fashion brands told Miss Tweed that they were uncomfortable about signing a deal with Farfetch due to its perceived precarious financial situation.

Industry players are concerned Farfetch’s troubles could have ripple effects throughout the entire ecosystem. There is a systemic risk as there is for banks. If one big bank goes under, this puts the whole financial system under huge pressure. The same goes for Farfetch since it’s the biggest marketplace for fashion and luxury goods. Many small brands and retailers depend on it.

Some industry sources told Miss Tweed that Farfetch was trying to borrow more money to replenish its coffers. They also said Farfetch bought a big piece of land in Portugal to build a new campus for its engineers, but construction work has been put on hold due to the company’s financial difficulties. Farfetch has declined to comment for this report.

It’s also possible that Farfetch will be delisted and is forced sell some assets to pay down debt. Richemont may to have to step in and put out a statement clarifying its position and intentions vis à vis the company. It’s the only strategic shareholder who can help, as we explain further. Richemont and Farfetch may not be technically “married,” but they have agreed to align their interests – for better and for worse. Richemont cannot run away from its responsibilities. The Swiss group declined to comment for this report.

The two companies are to become more integrated after the complex agreement they signed last year becomes effective. The European Commission is due to approve it by Oct. 20. Once the transaction gets the regulatory green light, the Swiss luxury group will use Farfetch’s technology for all of its watch, fashion and jewelry brands including Cartier, Van Cleef & Arpels, Chloé, IWC and Vacheron Constantin, and put these brands’ products on the marketplace.

Cartier is the world’s No. 1 jeweler and is estimated to generate more than €10 billion in annual revenue, around 8 percent of which comes from online sales. Farfetch is to get an estimated 7 percent cut of the revenues that Richemont brands will generate online using its technology.

Farfetch will also re-platform Richemont’s Yoox-Net-A-Porter (YNAP) and should get a cut of the online fashion retailer’s revenues. But it has also invested significant sums in these partnerships. Hence, it’s not clear how profitable they will be for Farfetch.

In August last year, Farfetch agreed to buy 47.5 percent of YNAP from Richemont and committed to acquiring a further majority stake if it became profitable in three to five years from the time the deal was completed – which is roughly now.

If Farfetch is struggling, how it is going to be able to sort out YNAP, let alone buy control of it? Richemont was keen to get YNAP off from its balance sheet and rely on Farfetch to sort it out. Richemont Chairman Johann Rupert was hoping Farfetch CEO and founder José Neves would remove this painful thorn from his side. The South African billionaire may end up with a much bigger wound.

As Miss Tweed reported in 2020 and 2021, Richemont has run YNAP to the ground and the company has been losing around €200-€250 million every year. In 2022, Richemont took a €2.7 billion write-down on its value based on Farfetch’s share price at the time,which was around $10. Farfetch shares closed on Friday at $1.63.

With the company’s stock market price in the doldrums, Richemont could take a further hit. Not only does it need to inject cash into YNAP as part of its agreement with Farfetch, it may have to prop up Farfetch as well.

As part of the YNAP deal, the Swiss group is providing a $450 million 10-year credit facility to finance YNAP’s losses depending on certain conditions. Also, once the deal is completed, Richemont is to get a stake of around 11.5 percent in Farfetch in exchange Richemont’s 47.5 percent stake in YNAP. Using Friday’s closing share price, the value of that stake is around $90 million.

This particular transaction values the whole of YNAP at around $190 million. Richemont is to inject $290 million in cash into YNAP, as part of the agreement with Farfetch. This means Richemont is actually paying more in cash than the total value of YNAP – at current Farfetch share prices.

On the fifth anniversary of this transaction, the Swiss group should also receive $250 million, expected to be settled in Farfetch shares. If it had been made today, that would represent a good chunk of the company’s share capital.

If Richemont does not step in, who will? LVMH’s Bernard Arnault does not believe in online retail, having lost enough money as it is with various Internet ventures, including 24S, the luxury multi-brand online boutique that works with the group’s Parisian department store Bon Marché.

Chanel and Kering are small minority shareholders in Farfetch and are expected to remain passive, knowing they will likely be further diluted. Industry observers do not see either of them rushing to Farfetch’s rescue. Chanel – like Hermès – does not sell any handbags online and Kering has its own proprietary online technology, having severed ties in 2018 with Yoox, its previous provider. Another strategic minority shareholder in Farfetch is Chalhoub Group, the luxury goods distributor specialized in the Middle East. It is unlikely to step in as well. And there is Chinese online giant Alibaba with which Richemont and Farfetch have a joint venture in China. That is not going too well either, industry sources say, as there is regular friction between Farfetch and Alibaba managers. But Alibaba needs Farfetch to reassure Western luxury brands about doing business in China.

So why is Farfetch’s share price so low? The company is worth less than its debt of $917 million as of June 30. On its balance sheet, at mid-year, it had liabilities, including current and financial liabilities, employee benefits, provisions and others totaling $2.9 billion. At the end of the second quarter, Farfetch had cash of $454 million. The company’s earliest debt maturity is 2027. Alibaba and Richemont hold $600 million in 2030 convertible notes, which could at their option be put in mid-2026. The company has no other short-term debt – as of now.

In the six months to June, Farfetch’s profit after tax of $796.4 million last year became a loss of $455.61 million this year. The full-year figure could be more than $600 million. Some analysts expect the company will lower its guidance again when it reports third-quarter results in mid-November.

Farfetch has consistently missed expectations nearly every quarter and more importantly, it has gone in too many different directions in the past four years, industry analysts say.

When it was launched in 2008, Farfetch was originally a marketplace for multi-brand stores. Its purpose was clear: make all the stock held by stores around the world accessible to as many consumers as possible. Back then, there was a contest for the store of the week and each boutique provided entertaining videos and stories that gave the website a warm and friendly personality. Consumers enjoyed browsing the Farfetch marketplace and discovering new fashion designers. Today, there are so many brands that it’s difficult to find out information about any of them, and there is not much editorial content left on the website either.

As more and more brands started selling on Farfetch on a concession basis, the stores’ names were removed. In parallel, Neves invested in the development of several different types of technologies: e-commerce solutions for brands and the Store of the Future, with gimmicks such as digital mirrors that could tell you what was in stock and could be fetched from storage. They were trialed at Browns’ boutique in London’s East End, which Farfetch has since closed. Clothes tags contained RFID chips so that they could be registered in a client’s mobile app and Browns could use this data to suggest various designs to the customer.

When he started Farfetch, Neves’ main argument was: our business model is great, we don’t own any stock. Then he surprised everyone in 2019 by acquiring New Guards Group (NGG) which back then had an enterprise value of $675 million. The idea was to sell the brand’s products on the marketplace. That meant that from now on, Farfetch was going to own stock.

NGG has the license to manufacture and distribute nine fashion brands including Off-White, Palm Angels and Opening Ceremony. It owns a controlling stake in all of them but Off-White, which belongs to LVMH.

However, as Farfetch’s financial resources have started to dry up, the company has had to cut its investment in NGG’s brands. This caused friction with NGG co-founders Davide De Giglio and Andrea Grilli who abruptly left in June. Neves canceled Off-White’s 10-year anniversary show that was supposed to take place in New York in September in homage to its founder Virgil Abloh, who died of a rare form of cancer in November 2021.

NGG’s performance has also been hit by the current downturn and adding to its woes, consumers are moving away from streetwear – its core business. LVMH has the right to take back NGG’s license in January 2026. Off-White is the crown asset, generating €300-€350 million in sales. It has some 70 boutiques and more than 300 points of sale.

Last year, Off-White’s underlying profitability, or Ebitda, was around €100 million. It’s not clear how much Farfetch could raise if it sold NGG. Without Off-White, the company does not quite have the same aura and weight on the fashion market. Being part of a portfolio of brands with Off-White as the flagship is not the same as without. Off-White opens doors for its sister brands.

NGG’s total revenues last year reached more than €620 million. In 2019, many investors and analysts criticized Farfetch for buying NGG, but it turned out that this was actually the only unit generating profits within the company. This year, NGG’s overall sales are expected to be lower.

Neves has acquired several specialized online retailers that are losing money: Stadium Goods in running shoes in 2018, Violet Grey in beauty in 2022. Last year, Farfetch bought Reebok’s European business and pledged to invest in the construction of a €200 million logistics center for the sports brand. You wonder how it will finance that.

Some people close to the company say Farfetch bought the Reebok business to compensate for the potential loss of income if NGG loses the Off-White license in early 2026 should LVMH decide to get it back which is likely. Farfetch has been firing staff from NGG – even though the company is profitable – and hired more than 140 people to help manage its Reebok project in Europe, a source close to the company told Miss Tweed on condition of anonymity.

Reebok is a much more mass-market brand and relies on a much wider distribution network than NGG’s fashion brands. This year, Farfetch was originally expecting to make €400 million in revenue from Reebok, but some industry sources believe that figure will turn out to be much lower.

In the past six months, business has worsened in many segments of the market, not just in streetwear. Trading has also proven difficult in beauty. At the end of August, Farfetch shut down the beauty division of the marketplace after finding it too hard to attract shoppers. Violet Grey continues to operate on its own.

It’s clear that Farfetch has overstretched itself. The company needs to narrow its focus. It must also reassure its partner brands and boutiques that it will still be around a few years from now. Richemont would be wise not to remain silent for too long as the more time passes, the more Farfetch’s share price plummets and its cost of capital rises as people grow concerned about its financial situation and the noose tightens around Neves’ neck.