José Neves’ Vision Paying Dividends for Farfetch

José Neves could have taken a victory lap around Wall Street on Thursday.

Investors were looking past $500 million in third-quarter net losses at Farfetch to higher sales, new customers, the promise of profitability, gains from the New Guards division and a much more digital future for luxury.

Shares of the digital platform shot up 14.6 percent to $49.51 in aftermarket trading. And that’s just the most recent gain, as the stock is up 76 percent this month and has increased more than 500 percent from a year ago, when investors were feeling shaky about the company’s move away from promotions and starting to own brands itself.

But when WWD asked Neves, Farfetch’s founder, chairman and chief executive officer, about the stock price, he demurred — as he did when the stock was trading at $8 last year — and zeroed in on his vision for the future of digital luxury fashion.

“We’re focused on our mission so we don’t focus on stock price movements,” Neves said. “We stay steady to our vision to be the global platform for luxury.”

That focus helped Farfetch last year as it cut back on promotions and accepted a period of slower growth while buying New Guards, the Off-White licensee and owner of Palm Angels.

Now those moves are paying off, with each bolstering Farfetch as it heads into a new phase.

Neves’ vision of future-luxe crystalized some last week when Farfetch inked a potentially industry-changing partnership with Alibaba and Compagnie Financière Richemont, with the backing off François-Henri Pinault’s Artemis, which controls another luxury giant, Kering.

The partnership marks a new kind of cooperation in luxury and will not only bring Farfetch Alibaba’s Tmall platform and millions of Chinese consumers, it will also power a much more connected approach to physical retailing.

Neves said fashion is embracing the partnership.

“The reaction has been amazing,” he said. “People are very excited to know, ‘When are we launching on Tmall?’”

The involvement of Richemont and Artemis is key, he said, again casting the partnership in terms of the luxury industry and not just a few of the major players.

“It shouldn’t be a movement of technologists trying to imagine the future of luxury, but also of brands that are with us in this strategy of digitization of the industry,” he said.

“Luxury new retail is a step change,” he said, using a play off of Alibaba’s “New Retail” approach.

When it comes to imagining a more techie future for fashion and putting it into action, Neves has earned some major credibility in the past year.

He has previously described Farfetch as something of a Netflix of fashion and the New Guards brands are the content that keeps people clicking — and having those names has helped the company bring down its customer engagement costs with a kind of halo effect.

“We delivered exactly what we told investors that we were going to deliver,” Neves said.

Keeping promises made in 2019 in 2020 has become harder than ever given the pandemic. But the ceo said there is a “paradigm shift” going on — with customers and at retail — and that Farfetch is at the center of it.

People are “discovering the incredible advantage of buying luxury online,” he said. “A Chinese customer can have their favorite boutiques from Paris, New York and Miami, their favorite brands in their pocket.”

Farfetch surveyed its newer customers and found that 45 percent plan to buy more luxury online after the pandemic and 23 percent of them were going to buy most of their luxury online when the world reopens.

“We’re creatures of habit,” Neves said. “What is a brand if not memory in our brain cells? Consumers are discovering the joys of buying luxury online, a very underpenetrated category. These are customers that are here to stay.”

And if they do, the betting among investors seems to be that Farfetch will keep growing.

The company’s third-quarter losses widened significantly, coming in at $537 million compared with the $90.5 million in red ink logged a year earlier.

Total revenues, though, showed the company is continuing its expansion track. The top line expanded 71 percent to $437.7 million from $255.5 million with gross merchandise value increasing to $797.8 million from $492 million.

Farfetch’s active customer count rose 45 percent to 2.7 million from 1.9 billion. Average order value slipped modestly, to $574 from $582.

In the third quarter, Farfetch’s brand platform revenue jumped 79 percent to $112 million, which reflected the timing of the New Guards deal. Within the division, Off-White launched another homeware collection and new collaborations with Nike. Additionally, Palm Angels became one of the top 10 brands on the Farfetch Marketplace, based on gross merchandise value.

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