Friday's Headlines: Farfetch's Plans Sink Stock
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Yext (YEXT) +19.3%
Snowflake Inc. (SNOW) +7.8%
Atlassian (TEAM) +6.5%
Shopify (SHOP) +6.2%
Smartsheet (SMAR) +5.8%
Moving Down ⬇️
Farfetch (FTCH) -35.1%
Salesforce (CRM) -8.3%
Costco (COST) -6.6%
Stitch Fix (SFIX) -5.4%
Lovesac (LOVE) -4.8%
Farfetch's Plans Sink Stock 👎
Farfetch (FTCH) provided updated guidance during its Capital Markets Day event on Thursday which disappointed analysts and investors alike.
For full-year 2023, the online luxury retailer expects gross merchandise growth of between 20% and 22%, reaching $4.9 billion, with $500 million of this generated from newly signed partnerships. It also forecasts an EBITDA between 1% and 3% which would be an improvement from the negative margin delivered in 2022.
Profitability is the short-term focus for the company which has struggled to grow in recent quarters due to macroeconomic conditions. In Q3, GMV dropped 4.9% year-over-year, while it grew a mere 1.2% in Q2.
CEO José Neves stated:
“I believe this industry has the DNA and structure to recover very quickly from any such macro difficulty in the future. The next phase [for Farfetch] is about profitable growth and strong cash generation levering the investments we’ve made so far.”
Farfetch’s presentation also covered its long-term plan to achieve $10 billion in GMV and an adjusted EBITDA of 10% by 2025. This would translate into revenue of $3.5 billion, up 50% from 2022. Farfetch anticipates $1.7 billion of this will come from its marketplaces while $1.5 will come from its brands (held under New Guards), and an additional $300 million will be generated from its whitelabel platform solution business.
These forecasts clearly weren’t up to Wall Street’s expectations, however, as the stock fell more than 35% on the news.
The Lipstick Effect Carries Ulta to New Highs 💄
On Thursday, Ulta Beauty (ULTA) proved just how recession-resistant it is when the cosmetics retailer delivered a stellar earnings report. The chain managed to blow analysts’ expectations out of the water with revenue coming in at $2.34 billion vs. $2.21 billion estimated while earnings per share was $5.34 vs. $4.15 estimated.
Ulta also beat on comparable sales which were up 14.6% year-over-year — analysts were only expecting 8.8% growth. Profitability metrics were also looking up with Ulta’s profit margin resting at 41.2%, a few clicks higher than its 39.6% margin last year. This helped net income rise 27.5% to $274.6 million.
Interestingly, consumers across income levels were spending more in Ulta which continues a trend first spotted in the beauty departments of Target and Kohl’s earlier in the quarter. Shoppers are also spending across Ulta’s categories. Makeup, skincare, haircare, and fragrance all saw double-digit growth year-over-year. According to management, even newer brands are getting their moment in the sun as consumers trade in and up for the holidays.
Altogether, this has meant big things for Ulta’s full-year guidance. Management now expects earnings of between $22.60 and $22.90 per share, while revenue is anticipated to be between $9.95 billion and $10 billion. This is a nice increase from previous forecasts of between $9.65 billion and $9.75 billion, and handily beats Wall Street’s estimate of $9.77 billion in revenue. Expectations for comparable sales were also raised to between 12.6% to 13.2% from a previous 9.5% to 10.5%.
Ulta’s stock is up a little less than 4% on the news.
Yext Climbs Higher on Steady Earnings 💸
Shares of brand management technology provider Yext jumped by over 19% yesterday following the release of its results for its fiscal third quarter. Despite guidance for the upcoming quarter failing to meet analyst expectations, shareholders still appeared to welcome the overall outcomes of the call.
Yext reported earnings per share (EPS) of $0.02 on revenue of $99.3 million. Analysts on Wall Street had expected a loss per share of $0.01 and revenue of $99.6 million respectively. As far as revenue goes, this marks 4% growth year-over-year on a constant currency basis, with the actual number remaining steady with the year-ago quarter’s figure. EPS jumped from a net loss of $0.04 per share in the same period last year — a significant win for the firm.
When it came to Q4 guidance, Yext underwhelmed slightly as it delivered a veritable mixed bag. The company expects EPS to come in at between $0.02 and $0.03 for the quarter, just outpacing the analyst mark at the top end, while revenue is slated to just miss the expected analyst estimation of $101.25 million.
While a lack of true revenue growth is sure to disappoint some people, Yext has managed to do a solid job of improving all around. Positive net income versus a previous loss, coupled with relatively promising but steady guidance makes for welcome reading. While its stock does sit down over 36% year-to-date, there have certainly been some green shoots over the last number of months as Yext’s stock has gained back some of its heavy losses.