Farfetch Limited

Good afternoon. My name is Chris, and I'll be your conference operator today. At this time, I would like to welcome everyone to Farfetch third quarter 2020 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, press the pound or hash key. Thank you. And I'd like to turn the call over to Alice Ryder, VP of Investor Relations. Ms. Ryder, you may begin your conference.

Hello, and welcome to Farfetch's third quarter 2020 conference call. Joining me today to discuss our results are Jose Neves, our founder, chairman, and chief executive officer, and Elliot Jordan, our chief financial officer. Before we begin, we would like to remind you that our discussions today will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements, and forward-looking statements made today speak only to our expectations as of today. We undertake no obligation to publicly update or revise them. For discussion of some of the important risk factors that could cause actual results to differ, please see the risk factor sections of our Form 20-F filed with the SEC on March 11, 2020, and in Exhibit 99.2 to our Form 6-K filed with the SEC on April 27, 2020. In addition, we will refer to certain financial measures not reported in accordance with IFRS on this call. You can find reconciliations of these non-IFRS financial measures to the IFRS financial measures in our earnings press release and the slide presentation, both of which are available on our website at barfetchinvestors.com. And now, I'd like to turn the call over to Jose.

Thank you, Alice, and thank you all for joining us today. I'm very pleased to be speaking to you about Farfetch's Q3 2020 results. Our business accelerated in Q3 to deliver record group GMV of $798 million. This record performance was underpinned by the digital platform, which accelerated to generate GMV growth of 60% year-over-year. our highest digital platform GMV growth in 10 quarters. We believe we're witnessing a paradigm shift in the way people buy luxury. From day one, FastHatch set out with a differentiated vision to enable the luxury industry by building a full suite of capabilities to connect the creators, curators, and consumers who are the last blood of the luxury industry. This has not only positioned Farfetch to capture the accelerating online demand resulting from increased consumer adoption in light of the continuing global pandemic, but we are actually helping drive this paradigm shift for consumers as well as for brands. Our Q3 performance was achieved during a quarter when most of the world had reopened physical retail following widespread lockdowns during Q1 and Q2, and when most consumers had the option of returning to their local luxury boutiques and department stores. This online adoption is consistent with what our recently acquired customers are telling us. In a recent survey of our newer customers, 45% said they will continue to do more of their shopping online now that they are used to it, and 23% said they would do most of their shopping online from now on. This clearly indicates that the luxury industry will not go back to the same normal as we knew it pre-COVID-19. and affirms my belief that we're witnessing a major acceleration of the sustained online adoption I had anticipated when I founded Firefetch 13 years ago. Q3 GMV for the Firefetch marketplace, which represents the significant majority of our GMV from consumers, grew more than twice as fast as in Q2 2020, largely driven by active consumer growth. as we leaned into a lower customer acquisition cost, or CAC, environment to drive efficient growth of our luxury consumer base, particularly via mobile app downloads. On top of this, we've continued to focus on retention by leveraging our vast data resources to offer a more relevant experience, and it is delivering results. Conversion rates for our data-driven personalized communications are 1.5 times higher than non-personalized messages on average. Our implementation of machine learning technology, such as our proprietary INSPIRE algorithm, are also driving engagement with these consumer communications, which is on average five times higher. This has contributed to a month-over-month improvement in retention rates from March through the end of Q3. To date, we have driven online adoption through our performance marketing-led customer acquisition efforts, and in Q3, we also set out to complement these efforts by building awareness of the Passage brand to ultimately increase organic engagement. You've heard me say before that Farfetch is a bigger company than it is a brand. While we've managed to build the leading global luxury fashion platform without meaningful branding investments, luxury is an industry of brands. And we see significant opportunity ahead in building awareness of Farfetch. With the industry in a critical phase of online transition, now is the right time. In September, we launched a new, upper-funnel marketing campaign, marking a key milestone in our Chapter 2 growth strategy. The campaign, taglined Open Doors to a World of Fashion, is focused on building brand love and an emotional connection to Farfetch by communicating what makes Farfetch unique, who we are, and what we do. The campaign was rolled out in Shanghai, New York, London and the Middle East, across out-of-home, print, social and online channels, as well as our first foray into addressable TV. In conjunction with this, we also launched a new brand identity for Farfetch and refreshed the look and feel of all external and internal facing touchpoints, including the marketplace. Not only are we seeing positive reactions from consumers who are saying that the new, clean, modern and luxurious look and feel allows them to focus more on their shopping journey, but luxury brands have also remarked on the elevated image of our marketplace following our rebranding. We're very pleased with the initial feedback and will amplify our campaign over the coming months to continue driving our unique brand positioning. In addition to driving online adoption by consumers, Farfetch is also powering the digital transformation for luxury brands and retailers. The accelerating demand we have seen across the Farfetch marketplace is driving heightened interest from brands and retailers who have taken note of luxury consumers' increased adoption of online channels. and far-fetched consumers are particularly attractive to brands and retailers. They represent one of the largest global audiences of luxury shoppers, and about two-thirds of our consumers are millennials or Generation Z. A higher proportion than the overall luxury industry, which offers our brand and retail partners, increased exposure to the customer segments set to fuel the future growth of the luxury industry. Additionally, our focus on delivering full-price sales has made Farfetch a particularly attractive channel for new and existing partners. many of whom see this challenging environment as an opportunity to take the actions needed to tilt their distribution strategy away from wholesale, towards direct-to-consumer, including by leveraging Farfetch's multi-brand e-concession model. Our record Q3 Digital Platform GMV reflects an increased mix of products sold at full price, and products sold without any promo. In fact, we had a 70% year-on-year reduction in promotional days during the period. And as we head into the Q4 promotional period, during which time we expect to see an aggressive push by our competitors in response to further physical shopping restrictions and concerns in light of the current resurgence of COVID-19 infections, Our plan is to continue executing on this strategy with respect to less promotions. This stance has strengthened our ties with our existing e-concession brands and attracted some of the most desirable brands to the Farfetch marketplace. We are thrilled to welcome Moncler, a top 10 brand on the marketplace. and have also recently signed Dolce & Gabbana, Ralph Lauren, and our first brand from the Swatch Group, Radlo, as new e-concessions, in addition to integrating additional supply points from existing brand partners who leaned in to the marketplace proposition. As a result, we saw our highest ever depth of inventory in Q3, and our overall supply partnerships have expanded to more than 1,300 third-party sellers now participating on the Farfetch marketplace, including more than 550 branded concessions and over 750 retailers. The strong results for both consumers and brands demonstrate the unique positioning of our global platform. which I believe will emerge from the current environment structurally stronger. And last week, we announced plans to work together with Alibaba and Richemont to build on Farfetch's existing platform capabilities to realize the luxury new retail vision, which is an extension of Farfetch's long-held strategy to be the global platform for the luxury industry. I am excited by the prospects of leveraging the leading-edge expertise Alibaba possesses in the areas of omni-channel and in-store technologies to accelerate its digitization of luxury by offering a suite of products powered by FastEdge, which will encompass both online and in-store technologies in both multi-brand and monobrand environments. In doing so, Luxury New Retail will enable leading luxury brands with one single partner and integration to achieve a global omnichannel presence via monobrand destinations, connected retail stores, WeChat, and the two leading online luxury fashion destinations, Parfait's Marketplace and T-Mall's Luxury Pavilion. I'm also thrilled to be partnering with Alibaba to form the Luxury New Retail Steering Group, and that we will be joined by Richemont Chairman, Johan Rupert, and Artemis Chairman, François Rippinot. Additionally, the formation of our China JV and our launch of a fast-edge star on T-Mobile Street Pavilion, which we are expecting for NEET 2021, will boost our exposure to include the 757 million consumers across the Alibaba Group. This initiative will be underpinned by $1.15 billion of total investments by our strategic partners into Farfetch, providing additional capital which further strengthens Farfetch's position to go after the opportunity of powering the future of luxury retail. And with that, I'd now like to send a call over to Elliot for a financial review.