Famous online platform Farfetch slashed its sales forecast in 2022, as it suffered a major loss of its business in Russia, and many other problems related to the pandemic crisis.
The company explained that this decline is due to many factors, citing the Russian war in Ukraine, the Covid-specific shutdowns in China, and the removal of discount stock from partner brands that pay for more sales at full price as factors holding back its business, according to business of fashion.
high sales
The company said it now expects total sales of merchandise on its digital platform to increase by 5 to 10 percent over last year, while when it presented its previous forecast at the end of February, it expected sales to rise by 28 percent to 32 percent.
Notably, the story was similar to sales related to the New Guards Group, which now expects to see 10% to 15% growth year-over-year, down significantly from the 20% to 25% growth it had previously directed.
high returns
In the fourth quarter, Farfetch’s revenue increased 6.1% to $514.8 million from total merchandise sales that increased just 1.7% to $930.8 million across its platforms, a marked slowdown from previous quarters.
drop in stock
E-commerce companies of all kinds have faced an uphill rally lately as they struggled to top their blockbuster sales at the height of the pandemic last year, and many have seen their stocks plummet, including Farfetch, whose shares are down 77% this year.
Notably, Farfetch is also among the many Western companies that stopped operating in Russia after its invasion of Ukraine, as the country was Farfetch’s third largest market, accounting for 6% of sales, making it a larger share of sales at Farfetch than many other countries. Other luxury companies, and given that sales in Russia were growing rapidly, Farfetch thought they would make up a larger proportion in 2022, while the war crisis halted all of that.
Why is the company facing such tension in China and Russia?
Jose Neves, the company’s founder and CEO, said the company had been building the business for several years and had acquired a large part of the online luxury market in Russia.
“Our success in Russia has, in fact, made it a disproportionate share of our business,” he added.
In China, it is Farfetch’s second largest market, and the company has felt the impact of the renewed shutdowns to curb the spread of Covid.
Elliot Jordan, Farfetch’s chief financial officer, told investors on a call that the turmoil in Russia and China had wiped out $750 million from its full-year guidance and accounted for more than 80% of the revision to its forecast, with the rest being because brand partners accelerated their efforts to remove items Discounts from the Farfetch market, which the company backed, and general caution given the state of the world.
In the end, the company sought to reassure investors that growth in other important regions, such as the United States, has remained strong, and that it does not see any general slowdown in sales of luxury goods online, although there are currently no plans to resume operations in Russia, but it expects Business in China rebounds as the country reopens.