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Shares of Farfetch (FTCH -35.06%) were plunging 23.6% in afternoon trading 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.
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%.
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.
Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Farfetch. The Motley Fool has a disclosure policy.
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