Shares of Farfetch slumped more than 40% premarket on Friday, as choppy demand in the online luxury goods retailer's top two markets, the United States and China, drove a gloomy annual sales outlook.
Farfetch also missed revenue estimates in what analysts called a "very disappointing" second-quarter earnings report, as it also took a hit from retailers cutting back on wholesale orders for the fall and winter seasons due to excess inventories leftover from spring and summer.
"We have seen a less buoyant luxury customer in the U.S. In Mainland China... the reality is that the recovery has not been as robust as we had expected when we reported our Q1 results," CEO José Neves said on an earnings call on Thursday.
Shares of the company were trading at $2.83 before the bell on Friday, and were set to open at their lowest since the stock's market debut in 2018. As of Thursday's close, Farfetch had a market capitalization of about $1.68 billion, per Refinitiv data.
Analysts at J.P. Morgan and Keybanc downgraded their ratings on the stock. At least six brokerages have cut their price targets on Farfetch.
"We appreciate Farfetch's management trying to right-size the organization and streamline the cost structure, but think it will likely take a few quarters for the business to stabilize and drive sustainable growth," said Oliver Chen, analyst at TD Cowen.
Farfetch said it now expects total gross merchandise value, or the total dollar value of orders processed, which is a key revenue metric, to be about $4.4 billion for 2023, compared with prior expectations of $4.9 billion.
The implied slowdown in the outlook was "quite significant", said Marvin Fong, analyst at BTIG.
"The greater question is whether the new outlook is sufficiently conservative given outstanding questions with respect to (the U.S. and China)...management's credibility has taken another blow and visibility is very limited," Fong added.
(Reporting by Deborah Sophia in Bengaluru; Editing by Krishna Chandra Eluri)
