Running Out of Moves

• Farfetch reports first-quarter results on May 26
• The company’s stock is down more than 80 percent over the last year, mirroring declines seen across the tech sector
• Investors are concerned about online brands’ and retailers’ ability to grow and achieve profitability as consumers return to brick-and-mortar stores

Farfetch is a master at reinventing itself to ride the latest trends in online retail. But it’s having a tough time convincing investors it’s not just another pandemic stock. Like most other e-commerce companies, the luxury marketplace benefitted hugely from the boom in online retail in 2020 and 2021. Now, with consumers reverting to their pre-Covid shopping habits, Farfetch must make the case that it has a plan B.

Earlier this year, Farfetch made a high-profile push into beauty, though adding a new category doesn’t solve e-commerce’s post-pandemic problems. A $200 million investment in Neiman Marcus Group marks a major expansion of the marketplace’s ambitions to provide e-commerce services to less-wired retailers. That’s potentially a lucrative market, though the rapid decline in Shopify’s fortunes indicates running the back end of online retail is not as dynamic a business as it might have looked a year or two ago.

The Bottom Line: The real game-changer for Farfetch would be a partnership with Richemont that includes a minority investment in Yoox Net-a-Porter. Such a deal would neutralise a major competitor and open up new relationships with luxury brands. But the parties have said little about the deal since it was announced late last year. Last week, Richemont’s stock plunged after the company failed to indicate progress toward an agreement.

The Changing Red Carpet

• The Cannes Film Festival wraps on May 28, with the amfAR Gala on May 26 among the highlights
• Along with the Oscars and Met Gala, film festivals are a key component of luxury brands’ red carpet strategies
• Revolve is sponsoring the amfAR Gala’s afterparty

The Cannes Film Festival is one of the bigger marketing opportunities for luxury brands, with a packed schedule of events and film premieres where celebrities can pose for the paparazzi. The amfAR Gala caps off the week, with an A-list guest list and a fashion show curated by Carine Roitfeld. In a sign of the times, the event’s lead sponsor isn’t a luxury label or premium spirits brand, but FTX, a crypto exchange (the sponsorship isn’t entirely disconnected from fashion; just last week, Balenciaga became the latest brand to say it would begin accepting cryptocurrency payments). The afterparty is sponsored by Revolve, an online retailer known more for dressing influencers for Coachella than movie stars on the red carpet. In addition to being the latest indication of how the line between influencers and celebrities has blurred, the party is a smart move for Revolve, which is looking to grow sales internationally.

The Bottom Line: As for what the stars will be wearing, expect big European labels to dominate. It’s their home turf after all, though Louis Vuitton, Valentino and the rest were omnipresent at the Oscars and the Met Gala too.

Nowhere to Go But Up?

• Gap Inc. reports first-quarter results on May 26
• Last month, the head of Old Navy, Gap’s largest brand by sales, unexpectedly stepped down
• Some analysts predict Gap will need to find a buyer for some or all of its brands if it cannot execute a turnaround

The good news for Gap Inc. is that maybe all the bad news is already priced in. Last month, the head of Old Navy abruptly departed, as sales at the once high-flying brand fell short of forecasts. A Wall Street Journal report last week pinned the decline on a poorly executed move to offer more-inclusive sizing in stores, which contributed to many popular styles being out of stock. In a way, that explanation is more comforting than the alternative: that Old Navy’s cheap basics are losing their appeal, whether to Shein, Target or Amazon. Gap needs Old Navy; Gap itself is still adrift, Banana Republic hasn’t recovered from the pandemic’s blow to traditional office wear and fast-growing Athleta is still too small to prop up its struggling sister brands.

The Bottom Line: At its annual meeting earlier this month, executives offered a rosy view of the company’s turnaround. Few were convinced, and the company’s share price has continued to slide. This week’s results will need to show some compelling evidence that customers are returning to Gap, Old Navy and the rest, or expect calls for spinoffs or a sale to private equity to grow louder.

The Week Ahead wants to hear from you! Send tips, suggestions, complaints and compliments to brian.baskin@businessoffashion.com.

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