Bloomberg) -As turbulent demand in the biggest two countries for the online luxury goods retailer, the United States and China, led a bleak yearly sales estimate, Farfetch shares fell nearly 40% to a record low on Friday.
In what experts called a “very disappointing” second-quarter earnings report, Farfetch also missed revenue projections. This was a result of retailers reducing orders for the autumn and winter seasons due to excess inventory.
“In the U.S., we have noticed a less booming luxury customer. According to José Neves, CEO, “the rebound in Mainland China has not been as strong as we had anticipated when we presented our Q1 results.
J.P. Morgan and Keybanc analysts reduced their stock ratings. On Farfetch, at least six brokerages have lowered their price expectations.
Oliver Chen, an analyst at TD Cowen, said, “We admire Farfetch’s management’s efforts to right-size the organisation and reduce the cost structure, but think it will likely take a few quarters for the business to stabilise and drive sustainable growth.
In contrast to earlier projections of $4.9 billion, Farfetch anticipated that overall gross merchandise value, or the total dollar worth of orders processed, would be roughly $4.4 billion in 2023.
According to BTIG analyst Marvin Fong, the suggested decline in the outlook was “quite significant”.
The bigger question, according to Fong, is whether the revised prognosis is sufficiently pessimistic given the unresolved issues surrounding (the United States and China). “Management’s credibility has taken another hit and visibility is very low,” he continued.
The price of the company’s shares was $2.87. According to Refinitiv data as of Thursday’s end, Farfetch had a market valuation of approximately $1.68 billion.
With incredibly volatile fundamentals and one of the most perplexing business models in our (coverage) area, Farfetch remains a very difficult company to understand, according to Wedbush analysts.
(Editing by Krishna Chandra Eluri; reporting by Deborah Sophia in Bengaluru)