Despite the name, there’s nothing far-fetched about this boutique fashion company right now, which is on the run of its life.
This article was originally published on MyWallSt — Investing Is for Everyone. We Show You How to Succeed.
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of Wall Street in any other year, can be chalked up to this exhausting pandemic providing an impetus for the largely outdated luxury fashion market to finally join the rest of us in the 21st century by moving online.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.
MyWallSt makes it easy for you to pick winning stocks. Start your free trial with us today— it's the best investment you'll ever make.
Disclaimer Past performance is not a reliable indicator of future results.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.
*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.