Is A Farfetch Investment Going To Be The Amazon Of Apparel?

This luxury retail company is making big moves on Wall Street and has further room to grow as it seeks to become a one-stop luxury shop.

Dec. 16, 2020

Despite the name, there’s nothing far-fetched about this boutique fashion company right now, which is on the run of its life.

Let’s be honest though, relatively few people have heard of Farfetch (NYSE: FTCH); it’s a British-Portuguese online luxury fashion retail platform that sells products from over 700 boutiques and brands from around the world.

In August of last year, the online retailer was struggling greatly, its stock in a tailspin after it spent $675 million acquiring New Guards Group. The immediate concern was that the retailer had accumulated an unsustainable amount of debt, and little did anyone know about the retail-destroying pandemic on the horizon. 

A year on from these major stock troubles, it’s making its own clothes, betting big on secondary-market sneakers, and thriving in the midst of a pandemic, with many touting it as the ‘Amazon of luxury fashion.’

From March lows of $5.99 per share, the e-commerce business — see, now its growth makes sense — has grown close to ten-fold since. This impressive rally, which would be the talk of Wall Street in any other year, can be chalked up to this exhausting pandemic providing an impetus for the largely outdated luxury fashion market to finally join the rest of us in the 21st century by moving online.

Quite the turnaround, but will it last?

Farfetch is at the forefront of this luxury fashion digitization trend. As such, the company is reporting 70%+ revenue growth rates and the stock is surging, and there are many reasons why it will continue to grow:

1. A big market

Luxury retail raked in $300 billion in sales last year alone but has digitized much slower than the rest of the broader apparel industry. The luxury fashion e-retail market is at an inflection point, wherein the market is expected to go from around 12% penetration in 2019, to 30%-plus penetration by the end of the decade. Rising tides will lift all boats, etc.

2. Never underestimate Gen Z

In a social-media-dominated world, Gen Z consumers are obsessed with their image, and one way to boost one’s image is through luxury items. As the leading e-retailer in luxury fashion, Fetch will be a popular destination for these shoppers. 

3. First-mover advantage

Today, Farfetch is the largest luxury fashion online marketplace in the world, with 1,200-plus luxury sellers and more than 2.5 million active consumers. If anyone is going to become the ‘Amazon of luxury fashion’, it’s Farfetch.

4. It’s got a big backer

The ‘Amazon of China’ is backing the ‘Amazon of luxury fashion’ now, after Farfetch recently announced a big partnership with Chinese e-commerce juggernaut Alibaba. With Chinese consumers accounted for 35% of global luxury spending in 2019, exposure in the world’s fastest-growing economy is a massive boost.

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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above.