What happened

Shares of Farfetch (NYSE:FTCH) were climbing today after the luxury fashion online marketplace breezed past estimates in its first-quarter earnings report.

As a result, the stock was up 12.5% as of 2:02 p.m. EDT.

Two pairs of sneakers set against a highback chair

Image source: Farfetch.

So what

The e-commerce fashion company has seen strong growth during the pandemic. That pattern continued as gross merchandise volume (GMV) rose 50% to $915.6 million, driving revenue up 46% to $485 million, which was well ahead of the analyst consensus at $455 million. 

GMV in the digital platform, which represents the core of the business, grew 60% to $790 million, and contribution margin in the category improved 100 basis points to 33%.

On the bottom line, its adjusted EBITDA loss narrowed from $22 million to $19 million, and its adjusted earnings per share loss improved from $0.24 to $0.22, which was better than expectations of a loss of $0.40 a share.

CEO Jose Neves said, "Farfetch is off to a tremendous start in 2021 with stronger than expected acceleration in the business in the first quarter and higher full-year growth expectations than initially anticipated. Our brand partnerships have never been stronger, and our customer and brand building initiatives are resonating well to drive awareness of our value proposition and retention of our valuable consumers."

The company's highlights in the quarter included launching on Alibaba's Tmall Luxury Pavilion, where it now has more than 3,000 brands available to Alibaba's nearly 1 billion customers.

Now what

Looking ahead, the company expects digital platform GMV of $910 million-$945 million, representing 40%-45% growth, and adjusted EBITDA of a loss of $23 million-$25 million. For the full year, Farfetch raised its guidance, calling for digital platform GMV of $3.725 billion-$3.865 billion, or 35%-40% growth, and an adjusted EBITDA margin of 1%-2% -- a sign it expects a healthy profit in the fourth quarter, its seasonally strongest period.

With a leading position in luxury online fashion and brisk growth even during challenging times for most apparel brands, the luxury stock looks well positioned to be a long-term winner.

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