What happened
Shares of Farfetch (FTCH) are plunging 23.6% in afternoon tradings on Thursday after the online luxury fashion marketplace filed a business update with the Securities & Exchange Commission.
Farfetch said it will host a Capital Markets Day with financial analysts and institutional investors today that will discuss in greater depth the company's strategic growth plan. Its stock was trading at $6.49 per share at 12:24 p.m. ET as investors expressed disappointment with where management saw the company heading.
Image source: Getty Images.
So what
On the surface, the guidance Farfetch shared wouldn't seem to warrant the collapse in its share price. The luxury marketplace says it expects full-year 2023 gross merchandise value (GMV) to grow to $4.9 billion, up 20% to 22% over 2022, while adjusted EBITDA margin of 1% to 3%, which would be an increase from Farfetch's outlook of a 3% to 5% decline in 2022.
Farfetch also provided an outlook to 2025 that saw GMV of approximately $10 billion for the full year. Adjusted EBITDA margin is forecasted to be 10%.
Now what
While Farfetch's guidance for adjusted EBITDA margin is an increase over 2022, it's likely not as much of a boost as the market was expecting from its partnerships, which seems to be pushing out the growth further than anticipated.
Especially with the potential for a recession early next year, Farfetch's growth trajectory isn't as strong as many thought it would be. Adjusted third-quarter losses widened to $0.24 per share from $0.14 per share, suggesting investors won't realize much benefit for several years yet.
