What is Farfetch?
Clothing, shoes, bags, wallets, glasses and watches. Farfetch is an online platform of Portuguese origin and headquartered in London, which resells items from boutiques around the world. It only shows brands that are considered luxury: Gucci, Balenciaga, Hugo Boss, Dior, Dolce & Gabbana, and many others. Some call it the Amazon of fashion, referring to the American platform that started selling books online and is now a global commerce giant.
Farfetch will have more than four million registered customers in 190 countries and work with more than 500 boutiques. It also develops e-commerce services for global clothing brands. It was founded in 2008 by Luís Neves, from Porto, an economist who inherited a shoe factory from his grandfather. “The idea for Farfetch emerged during Fashion Week in Paris, when José Neves realized that e-commerce was becoming an option for growing companies,” wrote Jornal de Negócios. “As soon as he returned to Portugal, he met engineers and started designing the company.”
Why is Farfetch so talked about?
It started as a start-up (an innovative company with great growth potential) and was much talked about in Portugal as our first ‘unicorn’, an expression used in the business world to describe a company that has a market value of more than a billion dollars. dollars.
In 2018, it entered the New York Stock Exchange and received international attention for the innovative activities it proposed. “A shopper in London might buy a pair of boots from a small store in Paris, and a shopper in Beijing might order a handbag five thousand miles away in Venice,” The New York Times summarized. The high point for José Neves’ company came in 2021, with a valuation of more than 20 billion dollars (about 18 billion euros), largely driven by the boom in digital commerce during the pandemic lockdowns. Suddenly the losses started.
Why is there negative news about this company?
“What some people predicted has happened: there will be four consecutive quarters of losses, people are being laid off, the shares have lost 95% of their value at the IPO and their market value is below 400 million,” he summarized together. a few weeks ago in an opinion article in DN José Gomes Mendes, professor at the University of Mindo and former Secretary of State for Planning.
This means that José Neves’ promise that “2023 will be a great year for Farfetch” was not fulfilled. On the contrary. In the summer, the country announced its intention to lay off 17% of its workers and this month it decided to increase this figure to 25%, according to Público. Officially, the company has 6,728 employees in Portugal, the United Kingdom, Italy and the US. The majority are in our country: 3,342 people.
There has been a succession of bad news, the most alarming of which came on November 28, when the British newspaper The Telegraph wrote that Farfetch is considering delisting from the New York Stock Exchange, which, if it happens, will cause “huge reputational damage.” cause. , said lawyer Pedro Sá, quoted by Observador. That same day, the first Portuguese “unicorn” made an unusual decision: he canceled the presentation of the quarterly results.
Last Friday, The New York Times said Farfetch has been “fighting for survival,” after a terrible week that saw the company’s shares fall below a dollar to at least 53 cents.
What does the company say?
Silence is José Neves’ rule. There have been no official comments on the setbacks that have become public knowledge, meaning the company may want to protect itself, including from a lawsuit that became public at the beginning of this month and is taking place in a court in Maryland, in the United States. US: A class action lawsuit over alleged “false information” from Farfetch, which allegedly harmed several investors.
There are also many uncertainties internally and the lack of information is identical. Strangely enough, Farfetch has brought forward the payment of the December salaries of its employees in Portugal (spread across Braga, Guimarães, Porto and Lisbon), according to the newspaper Público. An employee said anonymously: “No one says anything. They ask us to continue working normally. But how is that possible if no one knows if they have a job tomorrow?”
Is redemption possible?
The Minister of Economy, António Costa Silva, commented on the situation last week. He said he was “watching closely” and recalled that companies have “ups and downs”, hoping the “situation can be stabilized and Farfetch can return to what it was before”. The British channel Sky News reported that the company may resort to intervention from the American fund Apollo Global Management (AGM), which has shown interest in the takeover of Novo Banco in Portugal.
Is Farfetch the only company in its segment having problems?
No. The list of online luxury stores that have suffered multi-million dollar losses or mass layoffs is long. This is the case with the British Matches, the German Mytheresa or the Canadian SSense. The decline of e-commerce groups is a reflection of the difficult post-pandemic environment, the Financial Times wrote. The industry has cooled in part due to increased competition among luxury goods platforms, which has driven up the price of digital advertising, which is the most effective lure for these companies. Moreover, with declining demand, luxury brands are trying to better control their image and value, turning away from resale platforms like Farfetch, which thrive on discounts.
Source: DN
