Earnings Call: Q2 2021

Aug 19, 2021

Afternoon. My name is Erica, and I will be your conference operator today. At this time, I would like to welcome everyone to the Farfetch Second Quarter 2021 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks. There will be a question and answer session. Investor Relations. Ms. Ryder, you may begin your conference. Hello, and welcome to Farfetch's Q2 2020 conference call. Joining me today to discuss our results are Jose Neves, our Founder, Chairman and Chief Executive Officer Elliot Jordan, our Chief Financial Officer and Stephanie Fair, our Chief Customer 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 quarter. We undertake no obligation to publicly update or revise them. Call. For a discussion of some of the important risk factors that could cause actual results to differ, please see the Risk Factors section of our Form 20 F filed with the SEC on March 4, 2021. In addition, we will refer to certain financial measures not reported in accordance with IFRS on this call. 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, session, both of which are available on our website at farfetchinvestors.com. And now, I'd like to turn the call over to Jose. Quarter. Thank you, Alice, and thank you all for joining us today. I'd be happy to speak with you about our results in Q2, quarter, which is the Q1 that fully lapped the effects of store closures and travel restrictions brought on by the COVID-nineteen pandemic. Quarter. Reflecting on the past year, I am very enthused by the extraordinary resilience of the luxury industry. Quarter. Overall, luxury is seeing very strong demand with many brands reporting sales in excess of their pre pandemic levels. Quarter. The industry is returning to a secular growth trend, which is even more remarkable given the restrictions that still remain in place globally. During the past year, the industry has also taken the opportunity to rebalance an overexposure to the wholesale channel quarter. And I take pride in the fact that Farfetch actively partners with brands to enable their migration to direct to consumer or VPC channels for greater control over their online sales, including with quarter. Finally, I am tremendously excited by our significant market share capture on the most relevant 2 year stack period where our digital platform GMP increased by nearly 90%. Quarter. In fact, this 90% increase is the key highlight of our performance this quarter where we delivered 40% year on year growth call, along with more efficient demand generation and higher adjusted EBITDA profitability, which in itself is a reason to celebrate. Quarter. This in combination with another key result this quarter demonstrates significant strength. Quarter. Full price sales on our marketplace grew 90% year on year, which allowed us to shrink the markdown activity in our business by double digits quarter and still achieve our growth targets despite the reopening of physical stores. Quarter. And on a 2 year basis, full price sales grew 120%. The reason why this is so important quarter. Going forward, these stronger full price customer cohorts, which have grown on the 3 year stack at incredible pace, will underline our future growth. On the back of strong performance by the marketplace as well as our other business units Across the group, Q2 GMV grew 40% year on year, exceeding $1,000,000,000 for the second time in the past three quarters quarter and more than doubling as compared to Q2 2019. This month, we also marked the 2nd anniversary of our new Gazza exhibition. One of the core strategies behind the transaction was to create a pipeline of original content and exclusive collapse that will drive buzz and a significant halo effect to increase the engagement of our global customers about the Farfetch brand and ultimately drive more organic traffic. I am pleased to say we have succeeded in space. New Gas has propelled brands like Off White and Palm Angels to become top 10 brands on the marketplace by GMV in Q2. And these brands collabs draw customers to the Farfetch platform with little to no marketing expense. The strong momentum behind new gas brands is also evident in the acceleration of high generating capsules they are producing. Recent collabs have included Off White's Lemonade Nike Air Force 1s, Paul Mitchell's collabs with Missoni and Tim Wang and Herbalife's collabs with Nike Banks, Chamber of Monster Eyewear and even and 1st ever redesign of Moet and Chandon champagne bottle. Off White is going from strength to strength, Driving continued growth on the back of brand elevating collections and expanding categories. And given that Palm Angels is demonstrating quarter. A similar growth rate to Off White at a similar stage of development. We are thrilled to have recently increased our investment in Palm Angels to now have full ownership of the financials operating company and a majority interest in its brand entity. Quarter. Looking forward, we see tremendous opportunity for continued growth from new gas. We plan to rent collapse quarter. I have more than 50 in total planned for 2021. We will also look to continue expanding our brands into new categories, such as beauty, to enlarge our distribution with preferences on Tmall and further enhance the shopping experiences by digitally connecting Our directly operated stores via our luxury new retail or L and R capabilities. Call. We also have plans to launch and grow many more brands, including the first brand jointly created by Farfetch and UCaaS called There Was 1 due to launch later this quarter. Born from our marketplace data insights, there was 1 is a sustainable line of luxury wardrobe classics, designed initially for women and offering a high quality to price ratio, which will be exclusively offered on the Farfetch digital platform. Finally, I'd also like to update you on our 2021 strategic pillars, which I'm pleased to share are all quarter. Starting with brand partnerships. Our execution on prioritizing full price quarter. And reducing promotions over the last 2 years has led to strong alignment with industry players, and our relationships have never been better. Top 10 third party e concession brands expanded available stock units more than 70% quarter year over year and saw a more than doubling of sales over the same period. Quarter. Our commercial relationships have also matured to a level where we are now seen as an essential strategic partner who provides valuable insights. Call. As a result, now that brands are beginning to reengage in advertising after taking a hiatus during the pandemic, They are also engaging in opportunities to tap into our last pure play luxury audience to achieve their marketing objectives. This has translated into our highest ever quarter of Media Solutions revenue in Q2, which Stephanie will discuss in more detail. Moving to LNR and FPS. We continue to have conversations with multiple large enterprise customers on a broad spectrum of capabilities from Global Ecommerce to Logistics as a Service and Eleonair quarter. And continue to see existing partners take on additional SCS services. Quarter. Just this week, we also kicked off and exciting pilot of our newest solution, which expands the capabilities we have implemented in our own ground store to our community of 3rd party retailers on the marketplace, our largest platform tenant. Farfetch Connected Retail will leverage the Farfetch app to act as an interface between our 3,000,000 plus marketplace consumers and participating Farfetch retail partners around the world. Using our Farfetch app, consumers will be able to be notified if their wish item is available for try on or purchase in a nearby store, identify themselves as a Farfetch customer when shopping at parts and boutiques and pay for their purchases via our app among other functionalities. On the other hand, Contiques will be able to use the app to deliver a more personalized and interactive service to Farfetch consumers, both in store and remotely, quarter. While benefiting from the incremental food traffic, Farfetch can deliver from our last luxury consumer base, quarter, which is even more crucial in the post pandemic environment. And while we are initially rolling this out with retailers, We also have plans to extend this solution to brands to drive Farfetch consumers to flagship stores they would connect to our marketplace. Call. Moving to China. In Q2, our China team continued to drive strong performance as GMV growth quarter. The fashion authority we have built among high end luxury consumers quarter. In China, has drawn brands to see Farfetch as an media partner in China as well as globally. We have engaged our private clients in experiences with brands such as Burberry and created localized and culturally relevant content and campaigns quarter. And we're thrilled to expand our relationship with Harrods, who recently signed and move here partnership with CuriosityChina, focused on enhancing their marketing strategy in China and powering their communications with quarter. I believe these are early signs that Farfetch China will not only be a unique DTC channel for many luxury brands, but it will also be a very powerful marketing vehicle quarter in this crucial market. This once again demonstrates the unique strengths and capabilities we have in that market. Q2 was also our first full quarter operating our storefront on T Mobile's 3 Pavilion TLP, call, and we are very pleased by the month over month growth we have achieved. We continue to hone our learnings on the Tmall platform quarter and improve our merchandising strategies. This has contributed to strong customer engagement across our very differentiated range as well as to building affinity for the Farfetch brand as our T Mobile fan base grew to 250,000 followers. Quarter. We continue to remain very excited about serving the luxury shopping demand of Chinese consumers. Quarter. Our unrivaled brand partnerships and global supply position us well, quarter, particularly in light of recent guidance, which indicates travel restrictions may continue for another year, which we believe will further drive the repatriation of luxury demand within China. I'll now let Stephanie update you on the remaining two strategic pillar. Stephanie? Thank you, Jose. Hello, everyone. I'm pleased to update you on the progress we have made towards our brand and unrivaled customer experience initiatives, both of which have supported the focus we have put on increasing full price sales. Quarter. First, with respect to brand. Our brand initiatives involve a holistic approach aimed at building an emotional connection to the Farfetch brand and ultimately driving more organic traffic and loyalty. Over the past 2 years, our brand campaigns, rebranding Farfetch quarter. And focusing on our marketplace experience, upgrading our content and editorial and integrating our brand ethos throughout the end to end customer journey Has strongly contributed to delivering on our objectives. Following our second full funnel brand marketing campaign in 4 key luxury markets, quarter. The New York Metro area, London, Dubai and China in April, our Q2 brand tracker survey noted year over year improvements in brand awareness call with particular upticks in the U. S. And UK. And we believe this is translating into lower cost traffic as our mix of paid visits in Q2 quarter. In favor of low cost or free channels, such as direct, app notifications, e mail and referrals. Importantly, we have further enhanced our already highly attractive luxury audience. Similar to Q2 2020, quarter. More than 500,000 new customers shopped on Farfetch in Q2 2021, but we saw a double digit increase in the average spend per customer quarter from this year's cohort compared to the prior year cohort. This is an indication of the quality of the customers we are acquiring quarter. We're buying into full price items at a higher average sales price. In addition, customer engagement has strengthened. Retention rates continued to improve year on year in Q2 and year on year average order frequency increased for the first time since the pandemic. Another indication of the traction behind the Farfetch brand is our improving wallet share gains. New members to the Access loyalty program in the first half of 2021 have upgraded tiers at a higher 1 month rate than new customers added to access in the first half of twenty twenty. Quarter. As our base has increased and our efforts on retention are showing results, we have seen the mix of GMV from existing customers increase in each of the past 4 quarters, which together with our improvements in brand awareness, explains the increase in mix from unpaid channels quarter as we lean into our owned low cost channels. And specifically among private clients, quarter. The results we've seen from our most valuable tier of customers as their fashion needs shift to going out attire, evidences the strong connections they have with Farfetch. In Q2, GMV from private clients grew significantly faster than the marketplace, and private clients delivered a higher full price mix quarter as compared to other access tiers. As an additional element to our full price strategy, I am very pleased to announce another customer initiative quarter with the launch of preorder later this month, which will not only continue to generate newness for our customers through early access, but also enhance our strategic role with brand partners by extending their full price selling window. In an only on Farfetch way, Our preorder offering will be open to all and already counts many brands who have signed up to this new proposition. On our unrivaled global customer experience pillar. A key component and outcome of our brand building effort quarter. Has been to increase engagement from brand partners, driving more compelling partnerships, exclusive product launches for our customers and ultimately higher media solutions revenue on the marketplace as we recorded our highest ever media solutions revenue this quarter. Quarter. Many of our brand partnerships during the quarter focused on innovation, which highlights the fact that brands appreciate Farfetch, call, not only for our highly relevant audience, but also for the innovative technologies that we are able to leverage to deliver differentiated experiences and drive engagement. Campaigns range from Burberry's fully immersive 3 d and AR experience featuring the launch of their Olympia bag to Gucci's Imagine Futures campaign with a unique fitting room experience and Chopard's virtual try on launch campaign for their Happy Sport watch. In June, the marketplace also featured a content campaign highlighting our positively Farfetch ESG initiatives, quarter. Putting a focus on our conscious brand and including Farfetch Donate, which we were thrilled to expand to our U. S. Customers in partnership with ThreadUp. The innovative content generated by our brand partnerships helps build audience, which is even more critical in light of recently implemented privacy measures call, such as IBFA. We believe our highly attractive luxury audience makes Farfetch an even more strategic marketing partner for brands quarter as they seek to market on channels that have targeted audiences and access to first party data. Quarter. As a marketer on digital platforms ourselves, we are not immune from the impact of these policy changes, which are currently headwinds. Call. That said, we have been pleased to see what we believe are higher than average opt in rates by our customers as compared to other digital businesses to date. Call. Not only is this encouraging from a marketing standpoint longer term, but it also suggests that our increased efforts around personalization, call, including personalized comps, which drove twice the mix of sales in Q2 as compared to a year ago, have been successful in building a high level of trust and relevance with our customers such that they are willing to share their data. And now, I'll hand the call over to Elliot to discuss our financial results and outlook. Thank you, Stephanie, and hello, everyone. I'm delighted to be reporting a strong financial quarter. Performance across our Q2 of 2021 with 40% growth in GMV, 43% growth in revenue quarter and adjusted EBITDA of minus $20,500,000 versus minus $25,200,000 last year. Quarter. These results are in line with our stated expectations, demonstrate our platform is thriving as physical stores have reopened quarter. And importantly, with an increase of 3 50 basis points in adjusted EBITDA margin year on year, positions us well to deliver our goal of achieving our 1st full year of adjusted EBITDA profitability in 2021. GMV for Q2 was a touch above $1,000,000,000 more than twice the 488 dollars of GMV achieved 2 years ago in Q2 2019. As I've mentioned on previous earnings calls, quarter. We have been doubling the size of the business every 2 years. Our revenue growth outpaced GMV growth and quarter. With the exception of the impact from industry wide increases in logistics and global shipping costs, our margins are improving. Quarter. In particular, we have delivered strong growth in revenue from our high margin Media Solutions business, which has also supported a higher third party take rate of 30.3%. Demand generation is more efficient year over year within the digital platform. Quarter. We have achieved a significantly higher full price mix, which has driven a higher gross margin across our first party and first party original businesses. Quarter. And in the brand platform, our gross margins have increased on the back of a focus on strategic retail partners. Quarter. This means that we have achieved an improved adjusted EBITDA margin position of minus 4.7 percent quarter compared to minus 8.2 percent last Q2. I want to dive into the performance of the digital platform, quarter, which is driving the strong group position with GMV growth of 40% year on year and 89% on a 2 year basis. I'm particularly pleased with this performance as the Farfetch marketplace, which makes up the vast majority of GMV on the digital platform, quarter. Was growing at essentially the same level as it did during Q1 and growing faster in the quarter than it did across all of 2020, quarter even as physical stores have begun to reopen. The differential in digital platform growth rates between Q1 and Q2 was driven by the quarter. Trade of full price was particularly strong, up 90% year over year. Markdown and promotional led GMV took another step back in terms of contribution to GMV growth, quarter. This was particularly pronounced in the final 6 weeks of the quarter call. As actual levels of promotion and depth of markdown were significantly lower than anticipated quarter as our sellers focus on maximizing full price sales and margin from their springsummer 'twenty one collections and building their autumnwinter 21 new season campaigns. In terms of demand generation, despite having to navigate increasing cost pressure quarter. Across paid digital marketing channels as the space has become more competitive, the previous investments we have made into our marketing, tech, quarter. And the impact of our highly relevant editorial to improve customer engagement, help quarter. Drive efficiency and demand generation spend of 100 basis points year on year as a percentage of platform services revenue. We continue to see payback of new customer cohorts within 6 months of acquisition with the Q4 2020 cohort Achieving a lifetime value over cap ratio higher than the equivalent 2019 cohort. The other major business within the digital platform is Farfetch Platform Solutions, which leverages our platform to deliver bespoke and modular B2B SaaS Solutions for Enterprise Clients. Despite now annualizing new client additions from earlier in 2020, quarter. FPS is positively contributing to the growth of the digital platform with like for like GMV growth ahead of the overall 40% digital platform GMV growth in Q2. Before concluding on the segment, I want to turn to margins. Quarter. Digital platform gross profit margin was down 200 basis points to 53%, and digital platform order contribution margin was 90 basis points lower at quarter. Both measures were impacted by an increase in shipping and duties costs, quarter, which grew over 50% year over year, in part due to higher cost per parcel from our logistics partners, additional duties due to the UK's exit from European Union and a slight year over year increase in the returns rate. Quarter. We decided not to pass all of this incremental cost on to our customers. This is reflected in the P and L with fulfillment revenue up only 48% year over year quarter versus a 51% year over year increase in cost of revenue. While we expect these headwinds to continue into Q3, We have taken action to mitigate these and other costs in the medium term. In particular, we are in the process of shifting our principal stockholding facility for our 3rd party business from the UK to the Netherlands and further growing the 3rd party stock available across our globally distributed call. In addition, we have initiated plans to begin sharing some of the digital service tax within cost of revenue with our sellers. Quarter. Moving on to the brand platform, which represents NewGuard's wholesale revenue from our strategic retail partners. Quarter. This segment delivered GMV of $73,000,000 a 10% year on year increase at a 47% gross profit margin quarter versus 41.8 percent last year. Newguards business overall grew substantially ahead of this quarter. With over 100% growth year on year in the digital platform as we have shifted distribution in favor of direct to consumer channels. Revenue for our 3rd segment in store was $18,000,000 4.5 times higher than Q3 2020 quarter due to COVID-nineteen store closures in 2020 and the opening of new stores for New Guards brands throughout the last year. Excluding these openings, in store revenue increased 147% year on year. Quarter. Turning to our cost base, where we have delivered operating leverage year on year. The operating costs of our technology platform quarter. SG and A totaled 42% of adjusted revenue compared to 44.6% in 2020. Quarter. This continued leverage is being driven by the scale of the platform and investments to date to drive growth with minimal incremental costs, quarter, particularly in the operations, customer services, technology and corporate functions. We posted a gain on item tout at fair value of $246,000,000 which means we have delivered a profit after tax of $88,000,000 quarter and an earnings per share of $0.24 per share. Our adjusted EPS is minus $0.17 per share versus minus $0.20 last year. We closed the quarter with strong liquidity of over $1,000,000,000 Liquidity was boosted earlier this month as we completed the formation of our China joint venture, which was announced as part of our luxury new retail strategic initiative quarter in November 2020. As part of this transaction, Alibaba and Richemont each invested $250,000,000 in exchange for 12.5 percent each in the newly formed joint venture. Including the proceeds of this investment, our liquidity would have been $1,650,000,000 atquarterend. Looking ahead to Q3, quarter. We expect GMV growth overall to be 30% to 35% year on year with circa 100% growth in store quarter. Within the digital platform, we expect GMV to grow circa quarter. 30% year over year, which represents a sequential acceleration to more than 100% growth on a 2 year basis. Our digital platform order contribution margin is expected to be circa 30% of digital platform services revenue quarter as we continue to work through the near term headwinds we've seen year to date. And finally, we expect to deliver positive adjusted EBITDA quarter of circa $10,000,000 These results are set towards achieving our previously stated full year targets of strong GMV growth between 35% to 40% year on year and 1% to 2% margin at the adjusted EBITDA level. We are delivering on our long term strategy of sustainable growth and strong market share capture. Jose? Thank you, Elliot. The past year and a half was unprecedented, and I am really impressed quarter. I'm very proud that Farfetch was a close partner call for both retailers and brands in this historical period, delivering strong growth to our sellers quarter and as a result doubling our GMV in the last 24 months. Moreover, we had Many reasons to be very positive going forward now that the industry is transitioning to normality. I believe the Farfetch flywheel dynamics we always talked about are at play in full force. Our unique luxury brand eConfessions are growing extremely fast with the top 10 brands doubling SLP year on year. Our own brand is stronger and attracting more marketing partnerships. Quarter. And this means a boost in elevated supply, all of which is driving growth of 90% in full price sales year on year and 140% over 2 years, creating layers of strong cohorts for many quarters to come. This marketplace slide will effect is in turn accelerating our progress to become the global platform for luxury, call, including continued advances in China, FBS, Farfetch Connected Retail and Luxury New Retail. Thank you. Quarter. Your first question comes from the line of Doug Anmuth with JPMorgan. Great. Thanks for taking the questions. Call. I just wanted to ask first about China. I think perhaps there is a comment that China GMV has accelerated. Just curious, Is that driven by improvements at the TLP store and any more details around the monthly progress that you're making there? Also just curious if you're seeing any impact or just how to think about impact around increased regulation in China. So that's one question. And then perhaps for Jose, hoping you might have some thoughts to share just around Off White Following the LVMH majority acquisition and how did that play into your thinking call with Palm Angels and going to 100 percent ownership there in the operating company. Thanks. Derek, I think I'll take both questions actually. Starting with China, We're really, really pleased with the performance in China. The growth has accelerated, and the market I wouldn't call it the car, but the business that we've built in China over 6 years, which is our app business, which is The vast majority of our business in China, that's growing very, very fast. And of course, quarter. We now have the layer on top of that of Tmall. So we're growing very fast on both quarter. And I think it's a tremendous opportunity, continues to be a tremendous opportunity where the government has quarter. We issued guidance that international travel is probably going to be very limited, Very restricted for another year, I believe. So that's going to drive a continued repatriation of luxury quarter. I think we're uniquely positioned. We're probably the only Western company with the infrastructure, the team, quarter. The multiple partnerships and channels to really enable the industry to penetrate the China luxury market in a digital way. And in fact, I think that role of being the gateway to China for many, many brands will Continue to be of our rating partners. So I think the news are the pharmacy is very And great news on Wimal and all those channels. So very, very bullish on China. In terms of Off White following the LVMH acquisition, to your second question. I think, first of all, a huge congrats to Virgil and in fact to the NGG team, right? I mean, this is a brand that was created by Virgil, Vazide, Andrea, so the energy sheet team from scratch, right? So the fact that This brand goes from strength to strength and ends up with this massive step of approval It's a fantastic message to the creative community out there that we really have a brand platform that can build from scratch incredible brand. And you touched on Palm Angels as another great example. So a brand, again, built from 0 with the great talent, Francesco Legasse. And on the same track as well, quite frankly, if we look at the trajectory, we've seen the same number of the same patterns. And we're very, very supportive of the expansion of that brand. It started like Off White with menswear. We then expanded categories to women's wear, kids, eyewear. In the case of Off White, we expanded to homeware and beauty. That is now available as a quarter. So this is fantastic. We're seeing, of course, other brands in the portfolio of NGG, growing very fast as well. And we're creating new brands. We just announced a new only on Farfetch brand called There was one. So that will be a digital native brand co created by Farfetch and NTG. So that will be positive in terms of The message to the creative community and actually a sense of deepening of our relationships with LVMH. We have so many great ties with LVMH. We have many of their brands We did confessions such as Fannie, I'm thinking, doing extremely well. FBS clients, Curiosity China collaboration with Maxine launches and events within China as well. And now this opportunity they have to see how proficient we are in operating Digital brands that have a very strong digital component, right? Because the audience of this brand is more of a new annual and Generation 10 audience. So quarter. We think it's SG and A 2 years anniversary, so it's a big recent celebrate with question is from the line of Oliver Chen with Cowen. Hi, Jose. On Luxury quarter. You mentioned learnings and merchandise strategies. What's ahead there in terms of quarter. The things that you'll do and the catalysts that you're focused on, think about the total addressable market quarter with FPS and also what's on your mind for the pipeline there? Quarter. And then Elliot, with 2.2 GMV growth, it was attractive, but it came in at the lower end of the guidance range. If you could help brief us on how the regions looked in terms of Yes. In quarter. In terms of Tmall, it's very, very exciting what we're seeing, very strong engagement. We now have 250,000 fans On T Mobile, on our star. We're coming to T Mobile with a very differentiated offering. Over 90% of the, Over 3,000 presented brands we have on Tmall, 90% of those have excluded presence via Farfetch on that platform. That is a very compelling offering for the Chinese customer on that platform. In fact, we see Many brands that are not on the top 20, list on Farfetch ranking very high quarter. Pixel Tier 2, Tier 3 CD customers, our customers on our own app, they tend to be more of the quarter. Fashionista customers and on Tmall, we're seeing this fashion in 2 VF customer slightly lower AOV, not call. Not much lower actually. So actually, we're these are real luxury customers, but obviously with a 5 way lower AOP than the Farfetch app. Quarter. So that's driving our merchandise strategies really. So and we keep learning, obviously. We always said this is a learning curve. And also in terms of algorithms and bidding and advertising on the Tmall platform, as you know, is a platform driven by advertising as well. So all of those Leave us there. It's a learning curve, and we're very pleased. Alibaba is very pleased with the performance as well, and We will continue to build on this. And as we said, we're very confident it will be a material channel for quarter. Farfetch China in 2022 and beyond, and it's already contributing to our strong growth In the territory. For your second question around FPS, I think it is a tremendous opportunity. Quarter. In fact, FBS is not only about e commerce and end to end e commerce solutions. NPS is a suite of services we can enable the luxury brand with. And we call that quarter. This big vision, luxury new retail. So it goes from end to end e commerce to global logistics, e concessions as a service, fulfillment as a service. So there's a number of components here. We're discussing we're accelerating conversations with multiple enterprise clients. I think these conversations are going to accelerate. As you can imagine, with our enterprise clients. I mean, Chanel is a $10,000,000,000 business. Harris is almost $3,000,000,000 business. These customers, quarter. Investing CapEx has replied on all of that. I think now that the industry is transitioning to normality, I'm confident that we're going to see an acceleration of the multiple conversations we have. But let me stress that The existing customers on SBS are expanding the services they use with us and are also growing their business with us faster than the microplate. So we have growth from FPS from existing customers, both from expansion of quarter and the growth we're enabling for them globally. That is the bulk of the microfetch. So we thought this contributed to the overall blend quarter. It's a very, very powerful pipeline of conversations. And Oliver, it's Elliot here. Just on quarter. Obviously, we're absolutely delighted with the position that we achieved, particularly if you look at quarter. Growth on the 2 year basis. I think it's important to look back to where we are versus 2019. So, we start to normalize some of the impact of the pandemic. And Obviously, the digital platform is up 89% on that 2 year basis, very similar to the 2 year growth rates we delivered in Q1. And overall, the business quarter. More than double in terms of GMV versus 2019. In terms of what we saw throughout was that in the last We didn't see as much quarter. As we were previously expecting, so in the sort of the guidance that I gave, the deployment of our supplies on the marketplace going into sale, Usual levels of depth of markdown and breadth of activity And actually, we just didn't see that breadth in-depth as we had previously seen. And as a result, quarter. The full price mix dramatically increased year on year. It was a rather full price markdown quarter, as you would expect because of springsummer clearance It was actually a full price quarter very similar to full MTs and sales and our full price value stack. So, where we sort of started Towards the narrowing of the range was in those last 6 weeks as we didn't see that So, maybe if I just run through some highlights of our top The U. S. Actually accelerated between Q1 quarter. In Q2, growing ahead of the overall average. Mainland China accelerated between Q1 and Q2, growing ahead of the overall Asian markets like Korea accelerate ahead of the overall average quarter. And then some core sort of traditional markets like France and Italy also Delivering ahead of the overall average. So really strong broad based growth. And the only sort of deviation really there was on the full price versus markdown and the fact that markdown was a bit softer than we were expecting. I actually think that's a really good thing. Our sellers on the marketplace tell me that's a really good thing because they were able to maximize their margins from the springsummer campaign. They were able to hold back on markdown levels and carry over more into building their water winter campaign. Obviously, helped drive the AOV up. You see the AOV was up 20% year on year, which is obviously a key metric for us. And most importantly, The sellers now 3,000,000 plus active consumers, 500,000 new customers that Stephanie said quarter. It's highly desirable to buy into their full price campaigns. Hence, while you saw the Media Solutions revenue up quarter. Significantly year on year growth over to 30%, 30.3% take rate, all coming from strong commission quarter and media solutions revenue from the brands. So, really well positioned question. Yaroni Syngelhorst with Goldman Sachs. Quarter. Hi, good evening, everyone. Thanks for taking my questions. Can I actually go back to the regional information that you've given? Obviously, you've given quite a bit of color already, but quarter. There was a lot of concern in the market currently with regards to the growth outlook for Luxury as we can see a bit more volatility in share prices. Quarter. The end of June seems quite a long time ago. Now if I pose the question slightly differently, we think about the outlook for Q3 that you provided with us with, is there any change to how you're thinking about the regions versus 3 months ago. So is there anything that you're seeing either U. S, China that we should be quarter. And then secondly, for China, just on the JV. Can you tell us a little bit about the inventory availability? I know in the past you talked about the number of brands and the availability. But is the inventory and the inventory quarter. That's comparable to what you have on the original China platform. Are there any brands not there through Tmall. And then just related to China TV, can you also tell us about the competitive environment? Obviously, quarter. You have net support on the app very close by. Is there a different customer support that you think is being quarter. And the logistics benefit is all operational, logistics benefits commentary from Alibaba, your partners. Thank you. Louise, let me just follow-up on the regional mix question. Quarter. As usual, I won't be providing sort of information about the quarter that we're in. But quarter. Let's just sort of talk about maybe the exit rates from Q2 in terms of regional mix. Quarter. China really is a key enabler of growth here. And as Jose sort of touched on Before the overall proposition, both on the Farfetch app and the sort of direct relationship we have with the customer's water, We're also seeing the U. S. Continue to deliver strong levels of growth as we exited the quarter and into quarter. The start of Q3, a reasonably good sort of pickup from another top five market, the U. K, as we trade quarter. All of those markets that I've just talked about are markets where stores have effectively reopened, physical stores have reopened, and yet the marketplace continues to deliver a fantastic levels of growth. And quarter. The guidance that we've given of 30% growth for this year, actually on a 2 year basis is over 100% on a 2 year stack. So, an from the first half position on that 2019 basis. So Good broad growth. I think this really highlights the fact that the investments we've made to date to build out a global proposition, The 3,000,000 plus active consumers are well distributed around the world, and we're able to navigate through any challenges that might come our way. But those top Hi, Louise. Great to speak to you. In terms of the question, I think it's extremely strong to highlight quarter. I would like to highlight that all the brands that are On the Farfetch app that you and I can see here in the West, are available and in full assortment in our China app, So we don't have any brand that we don't cover globally. So I think that's very important. In terms of the Tmall, we've seen very strong adoption from brands on that channel. When the brand is available on Tmall, it is available with a full assortment. So what 100% availability will be it. So same That same brand that you have on the Farfetch app. Quarter. There is a number of brands that, as I updated you last quarter, there's a number of brands that have asked for some time to compare those brand that had launched just very recently, some of them a month, 2 months, 3 months ago before our launch. Quarter. On Tmall, I think we start to have great case studies of brands that have both the presence, direct presence on Tmall and the presence on T Mobile at Farfetch and have benefited from that. Like we have 7.5x The number of SKUs that those brands have on average on Tmall. So we are Really boosting their visibility on that app that has 800,000,000 customers that send it to the Shopper's balcony, right? So we had strong case studies, and we think we can soon start sharing those with the other brands to make them quarter. But with the current supply, I think what we're seeing, it's incredible because it's very complementary. And actually, it's a good segue to the second part of your question. In China, we're attracting a very young customer. Actually, we're attracting a very young customer globally. So, But in China, it's even younger. So around 30 years of age versus 34 years of age, on average, we will take globally. So that is a strong differentiation in our offer, which 90% of the brands we offer are again excluded to Farfetch on Tmall. The other company you mentioned, NAP on T Mobile, they operate on the retail model, on the wholesale model, quarter. So very limited inventory. I haven't the count in front of me, but I am now with 3,200 and 50 brands give or take on representatives. I don't think you can compare apples to apples. It's a very different proposition. And again, in terms of the editorial, the merchandising, we're really attracting quarter. That's new annual and generation Fed customer base. And we know that the majority of the growth is coming from those customer cohorts In China and in fact globally. So we think we have a very, very strong competitive position in that market. And again, in terms of Western companies in that market, quarter. We have 600 people on the ground. We have a unique app, both for iOS Android with incredible functionality built by Chinese engineers quarter. And Robert, people on the YCY designers and an incredible logistics proposition, both quarter. So it will be another year of repatriation of luxury demand in China. And luxury is very under penetrated. So even if there are, as you touched today, there were concerns in America, concerns volatility, some luxury stocks related to China. I think the point quarter. In China, online luxury penetration was single digit We don't no one really has the numbers. Already a very relevant sales channel for many of you friends. And Your next question is from Stephen Ju with CF. Jose, I wanted to ask about your, I guess, efforts at the beauty category, quarter. The wholesale versus marketplace mix in this category. Is this something? Call. I got a follow-up on the markdown versus full price sales comments earlier We would have to think it's not quarter. Sitting very well with your brand partners. So, is there anything you And share in terms of the feedback of the brands and what we hope will be increased willingness to work with the others. Call. Hi, Susan, it's Stephanie. I will take the duty question. So call. As we mentioned in the last earnings call, we see duty as a huge category. It's a booming category, and we are very well positioned to meet here quarter. Just a great opportunity. It's 25% of global personnel, not really good. In In terms of our own proposition, I think it's very unique. And what the last few months have cemented for us question. In our conversations with brands is that there's really appetite to work with us. And crucially, it's because of the model that we're offering them. It's a new concession model. It really helps and enables them to then move to direct to consumer. Brands in beauty have been traditionally very, very focus on wholesale and they are trying to move to direct to consumer and we can enable them for them. So we're working quarter. For the marketplace, size, 2 rounds and sort of complementing this But we feel that this is a real opportunity and the benefit of working with Farfetch. We've also seen and we really respond question. To our efforts around our customer, we have a highly valuable, very engaged, targeted luxury audience. And what we're hearing from the beauty brands is that they not only will see us as a sales channel, but actually as an opportunity to target audience to our advertising solutions channel. So really, the opportunity for us from each is significant and it's multifaceted, and we see this very much on track for 2020. And just on the sort of markdown full price position, I don't really want to comment too much on what the sort of competitors were doing around their markdown strategy. Quarter. Clearly, the high full price mix for us drove high gross margins in the Bumblebee business. You saw that In the numbers, 30% gross margins last year versus 33% margins this year. So strong full price mix, helping our margins. The brands, interestingly, have acted as I would hope they would, which is driving more stock onto the Farfetch quarter. As we head into the autumn winter campaign, we're seeing really good growth in terms of spring sorry, season original autumn winter product, quarter. Which sets us up well for, obviously, going into Q3 and importantly, the very important Q4 quarter. We're also seeing good levels of engagement from the brands around editorial and content on the platform. So, we're helping them navigate through that. That means we're definitely well positioned to deliver the numbers we talked about today across half. And as I said, that acceleration of growth on a 2 year basis. I think the other thing that's super interesting, though, is if you look at the 5 quarter. Given that we added them during a higher full price mix quarter than the 500,000 customers in Q2 last year, which was on a more of a markdown mix. My expectation is that these customers that we've added most recently are going to deliver a higher lifetime value moving forward and a much more valuable customer cohort. And actually, that's already played out. We saw the GMV from this 500,000 customers this year higher double digit growth versus the 500,000 customers that shop were for the first time last quarter. So, that's super exciting in terms of what we have achieved from delivering that higher full price mix. And to go back to your question, Yes. I can only assume the brands are delighted because they're certainly uploading more stock on the platform as we move forward. So I think it's going to be a really interesting autumnwinter campaign to see how we can drive through the full price for them over the next 6 months. Call. And we have time for one more question. The final question question will come from the Lorne Chinniak with Morgan Stanley. Hi. This is Nathan Feather on for Lorne. Just a quick for me. Quarter. Are you able to size how impactful the shipping and duties headwinds were in the quarter? And how much of the digital platform gross margin decline is due to these? Quarter. And then in your margin guidance for the Q3 and full year, are you assuming any relief in these headwinds or that they continue for the rest of the year? Thank you. Nathan, really, really good question. I think it's key that we do understand what's exactly happening Within the digital platform gross margins and particularly order contribution because it's a key metric for us. And there's a lot going on both near term and longer term. If you look at Q2 and specifically, overall, we had everything Going in the right direction in terms of water contribution margin, except for the impact of shipping and duties. We had Obviously, higher margin services are coming through. The 3P take rate was up. Our underlying sort of marketplace quarter. Our gross margin was higher if you exclude our shipping and duties, which I'll come back to. As I mentioned before, 1st party margin is higher quarter. And demand generation down as a percentage of revenue and lower also when you compare it to GMV. In terms of shipping and duties, the increase year on year was north of 50%. So, that's sort of Very much north of 50% in terms of cost. And that compares to the 40% GMV. And obviously, part of that GMV came through from AOV growth. So, our order growth was below the 40% number. So, quarter. Shifting up in the 50s versus lower order growth shows you how dramatic that increase was year on year. Quarter. The fulfillment revenue line, the amount of that we pass on to our customers, only grew 48% year on year. So you can see that we obviously incurred these industry wide charges. We decided not to pass on The incremental cost to our customers. And that obviously had a big impact to the gross profit margin. The sole reduction in terms of direct impact on gross margin apart from mix that you'll see from the 3P versus 1P business. Quarter. As we look forward into Q3, we're going to have to continue to deal with that external cost pressure. So shipping and duties will continue to increase. We're going to see further search engine marketing cost inflation And I think also some additional costs coming through from other regulatory changes, including the IDFA and sales taxes, etcetera, etcetera. We will obviously need to manage through those and the order contribution target that I've given you accounts for those further headwinds in the near term. But due to our ability to drive margin expansion from other areas of the group on the back of previous investments in the strong business we've built to date, in particular, the tech quarter. Our marketing operations team, but also growth in revenue from those higher margin products means we're still on track to deliver full year profitability as planned. And we continue to build on our customer engagement activity, consistently delivering on the top line growth. We can manage those short term costs and still achieve our medium our short term numbers. This includes shifting 1P and 3P stock closer to our customers. This is in the fulfillment by Farfetch, facilities that we've already invested in that will help drive down the cost of shipping medium term. We're also improving our first party gross margins through the growth quarter. And that means we see expansion of order contribution as we head into next year. So for now, we'll manage the costs. We'll continue to invest in the customer proposition, and I think that's going to set us up well to deliver good levels of growth call. Well, thanks, everyone, for joining us today. Hope you enjoy the rest of your summer, and we look quarter. This concludes today's conference call. Thank you for participating. You may now disconnect.