Why Farfetch Ltd (NYSE: FTCH) stock is crashing

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Farfetch Ltd (NYSE: FTCH) stock fell over 15% on 15th May, 2020 (as of  12:25 pm GMT-4 ; Source: Google finance) after the company posted bad results for the first quarter of FY 20. Farfetch has lost $77.7 million in the first quarter, compared to a loss of $79.2 million in the year-ago period. The company said it is “well capitalized” to continue on the path to adjusted profits for full-year 2021. However, due to uncertainty from the evolving crisis due to COVID-19 prevents the company from providing guidance. At the end of March, 2020 cash and cash equivalents were $422.0 million, which represents an increase of $99.6 million compared to $322.4 million at December 31, 2019. The increase in cash and cash equivalents were mainly due to the private placement of convertible senior notes to Tencent and Dragoneer, according to which the company had received $250 million (excluding transaction-related legal and advisory expenses) in first quarter 2020. This was however partially offset due to a net cash outflow from operating activities, mainly on the back of the seasonal reversal of working capital benefit in first quarter 2020, as well as New Guards’ acquisitions of Ambush and the Opening Ceremony brand.

Moreover, Gross Merchandise Value grew by $191.6 million from $419.3 million in first quarter 2019 to $610.9 million in first quarter 2020, which reflects a year-over-year growth of 45.7%. Digital Platform GMV rose by $80.2 million from $414.7 million in first quarter 2019 to $494.9 million in first quarter 2020, which reflects a year-over-year growth of 19.3%. The revenue growth was mainly due to 30.6% growth in Digital Platform Services Revenue to $185.2 million and the addition of Brand Platform Revenue from New Guards. In-Store Revenue rose by 87.7% to $8.5 million mainly due to the addition of revenue from New Guards, as well as growth in Browns and Stadium Goods directly-operated stores, despite COVID-19-related store closures toward the end of the quarter. The rise in Digital Platform Services Revenue of 30.6% was due to 19.3% overall growth in Digital Platform GMV and an increase in the mix of first-party GMV, which grew 39.6% year-over-year, and is included in Digital Platform Services Revenue at 100% of the GMV.

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