For José Neves, his new plan to boost growth could be expensive. The boss of Farfetch (online fashion) has had a difficult year. The departure from Russia, its third market, as well as the confinements in China, have meant that revenue, net of shipping costs, will only grow 3%, to 2,000 million dollars this year.
Neves detailed on Thursday his plan to sell ecommerce for luxury brands such as Salvatore Ferragamo or Richemont. He expects these “platform solutions” to bring in $300 million by 2025. It’s only 9% of expected adjusted revenue for that year, $3.5 billion, but the new unit’s forecast ebitda margin of 20% will make it much higher. profitable than the rest of the group, which is in deficit.
Although it sounds good, it comes with big costs. Farfetch will spend $170 million over the next year alone to “support” new partnerships. Not surprisingly, investors aren’t impressed, with Farfetch tumbling 35% on the stock market on Thursday.
The authors are columnists for Reuters Breakingviews. Opinions are yours. The translation, by Carlos Gómez Abajo, is the responsibility of Five days