e-commerce company Farfetch (FTCH) is seeing its stock plunge this morning after missing on revenue and issuing weaker-than-expected guidance. Farfetch received several analyst downgrades this morning. Yahoo Finance Live examines the retail environment that has online platforms like Farfetch competing with big-box stores.
BRAD SMITH: Let's also talk about Farfetch. This one, an interesting company, a fun one to keep tabs on here. One of my favorites.
JULIE HYMAN: Not fun if you're long the shares today.
BRAD SMITH: Yeah, I mean, fun is an absolute value, I guess, because it's enjoyable to talk about when there's a lot of moves. However, here we're taking a look at one of the moves, that is, Downward-Facing Dog for Farfetch. Lower by about 38% here, plunging after the company's revenue came in below expectations and issued weaker than expected guidance.
The company was also hit with downgrades from JP Morgan and KeyBank on the back of disappointing results here. And there you're taking a look at some of the actuals versus the estimates and, I guess, a mixed bag in terms of the adjusted EPS, not being as bad as it could have been but still a loss here.
And this is a particularly timely conversation. The Farfetch chief financial officer saying, interestingly, they're pleased with the second quarter performance. Demonstrating progress towards delivering profitable growth, positive free cash flow in 2023, digital platform performing well, returning to growth while maintaining a stable order contribution margin.
Compare that to the conversation that we had with StockX CEO Scott Cutler earlier this week, who we put the question to just about where they're seeing moderation and perhaps some of the prices that consumers are willing to pay, especially within that kind of resale or circular economy where people are listing high value goods in a marketplace style. And Farfetch is one of those major players.
And as you think about where consumers are even being more discretionary with their dollars, that high value and luxury purchase, especially for kind of the mass market that Farfetch or that a StockX even might be trying to cozy up to or retain the attention of, that becomes even harder when you hear from companies like target and Walmart that that same customer is now spending more with them and trying to figure out where they can have some cost savings elsewhere on a different product.
JULIE HYMAN: Right. I know that Walmart talked about getting more high income customers to old store. I'm not entirely convinced that the Venn diagram of the Walmart--
BRAD SMITH: But they're losing-- or gaining Farfetch customers.
JULIE HYMAN: Yeah, I don't know how much those are-- I don't know. I don't know. But the numbers don't lie. And the company saying that its gross merchandise value for the full year now gonna be only $4.4 billion down from its prior forecast of $4.9 billion. That's just not a great situation.
Doug Anmuth over at JP Morgan said this was supposed to be the year of execution for Farfetch. But it's been tough in part because of the weakness in US and China. I guess also Farfetch has a partnership with Reebok. And JP Morgan says there have been some early hiccups in that relationship.
BRAD SMITH: Yeah. I mean, the-- just last bit that I'll add on this too. Does Farfetch face challenges in a quiet luxury environment too? We talked with Simeon Siegel about this and whether or not quiet luxury as a larger trend is something that could have the propensity to affect a company in Farfetch that has a lot of high value goods that are in some cases seen as very flashy goods for consumers--
JULIE HYMAN: Yeah, I guess so. I mean--
BRAD SMITH: --to purchase.
JULIE HYMAN: I think nonlogo is mostly what we're talking about but I guess also sort of obvious from a particular brand or not. I don't know.
BRAD SMITH: I mean, the Gucci flip-flops that are in my card, everybody's gonna know that they're Gucci. I'm just not-- I can't buy them yet.