Farfetch Limited, the London-based global luxury fashion goods platform and a new home for the Reebok brand in Europe and global collaborations reported that gross merchandise value (GMV) increased 1.2 percent in second quarter 2023 to $1.03 billion, compared to $1.02 billion in second quarter 2022. Excluding the impact of changes in foreign exchange rates, GMV would have increased 0.8 percent year-over-year. Digital Platform GMV increased $61.2 million from $883.1 million in second quarter 2022 to $944.3 million in second quarter 2023, representing a year-over-year increase of 6.9 percent. Excluding the impact of changes in foreign exchange rates, Digital Platform GMV would have increased 6.6 percent year-over-year.
Digital Platform GMV’s performance in second quarter 2023 reflects a return to growth as the prior-year period no longer includes Russia following the March 2022 stoppage of the company’s operations in the region. Digital Platform GMV performance also reflects an increase in Marketplace orders and growth of FPS GMV. These were partially offset by a decrease in Marketplace average order value (AOV) from $596 to $561 driven largely by an increased mix of markdown sales, as well as a continued decrease in Digital Platform GMV in the U.S. and China.
Brand Platform GMV decreased 40.8 percent year-over-year from $107.1 million in second quarter 2022 to $63.4 million in second quarter 2023. Excluding the impact of changes in foreign exchange rates, Brand Platform GMV would have decreased 41.9 percent year-over-year. The decrease was primarily due to the timing of shipments and a decline in wholesale orders. The decline in second quarter 2023 Brand Platform GMV also reflects an uplift in second quarter 2022 Brand Platform GMV from a partial recovery of delayed first quarter 2022 shipments. This decrease was partially offset by Brand Platform GMV from the European partnership with Reebok, which was commercially launched in May 2023.
In-Store GMV decreased 17.5 percent year-over-year from $30.2 million in second quarter 2022 to $24.9 million in second quarter 2023. Excluding the impact of changes in foreign exchange rates, In-Store GMV would have decreased 18.6 percent year-over-year. The decrease was primarily driven by lower sales in stores in the U.S., partially offset by growth in stores in Europe.
Consolidated total revenue decreased 1.3 percent year-over-year to $572.1 million in second quarter. This decrease was said to be primarily driven by a 42.2 percent decrease in Brand Platform Revenue to $67.4 million, as well as a 15.1 percent decrease in In-Store Revenue to $22.7 million. These decreases were partially offset by an increase in Digital Platform Revenue of 10.5 percent to $482.0 million. Excluding the impact of changes in foreign exchange rates, revenue would have decreased 2.1 percent year-over-year.
Digital Platform Services Revenue increased 9.9 percent year-over-year, reflecting a 14.6 percent increase in first-party revenue and a 6.3 percent increase in third-party revenue. Digital Platform Services first-party revenue increased as continued stock clearance activity drove increased sales of first-party products on the Marketplace. The increase in Digital Platform Services third-party revenue was driven by growth in third-party Digital Platform GMV, alongside an increased Third-Party Take Rate. Excluding the impact of changes in foreign exchange rates, Digital Platform Services Revenue would have increased 9.2 percent year-over-year.
Digital Platform Fulfillment Revenue represents the pass-through to consumers of delivery and duties charges incurred by our global logistics solutions, net of any Farfetch-funded consumer promotions, subsidized shipping and incentives. Digital Platform Fulfillment Revenue increased 13.5 percent year-over-year, due to an increase in duties and a decrease in Farfetch-funded promotions.
Brand Platform Revenue decreased 42.2 percent year-over-year primarily due to the same reasons as Brand Platform GMV. In addition, second quarter 2022 included a full quarter of net economic benefit from Reebok, compared to second quarter 2023, where we recognized lower net economic benefit from Reebok following the commercial launch of the European partnership in May 2023. Excluding the impact of changes in foreign exchange rates, Brand Platform Revenue would have decreased 43.3 percent year-over-year.
Consolidated gross profit decreased 9.3 percent year-over-year, from $267.7 million in second quarter 2022 to $242.9 million in second quarter 2023. Gross Profit Margin decreased 370 basis points (bps) year-over-year to 42.5 percent of sales, driven primarily by the decline in the Digital Platform Gross Profit Margin.
Digital Platform Gross Profit Margin decreased 340 bps to 49.3 percent in second quarter 2023, from 52.7 percent in second quarter 2022. This decrease was said to be driven by an increased mix of Digital Platform first-party revenue (which generates a lower margin), driven by increased sales of first-party products as the Platform continued to sell through Browns inventory. Additionally, third-party gross profit margin decreased as a result of increased duties and shipping charges as compared to the previous year.
Brand Platform Gross Profit Margin decreased 20 bps year-over-year to 52.5 percent of sales, primarily due to a higher mix of lower margin sales.
Consolidated selling, general and administrative (SG&A) expenses increased $21.1 million, or 4.9 percent year-over-year, from $435.3 million in second quarter 2022 to $456.4 million in second quarter 2023.
Demand generation expense decreased 5.5 percent year-over-year to $70.9 million in second quarter 2023. As a percentage of Digital Platform Services Revenue, demand generation expense was 18.1 percent, compared to 21.1 percent in second quarter 2022. This decrease was driven by increased marketing efficiencies achieved by redistributing spend between territories during second quarter 2023.
The total investment in technology of $71.8 million in second quarter 2023, which includes technology expense and investments in longer-term development projects which are treated as capital items, was 14.9 percent of Adjusted Revenue in second quarter 2023, as compared to $67.0 million or 13.4 percent in second quarter 2022, reflecting an increased investment in capitalized spend, as detailed below.
Technology expense primarily relates to maintenance and operations of the platform features and services, as well as software, hosting and infrastructure expenses, which include three globally distributed data centers, including one in Shanghai, which support the processing of a growing base of transactions. Technology expense decreased $7.0 million in second quarter 2023 year-over-year, or 22.5 percent, as the company continued to lower its internal spend through cost efficiencies and repositioned external spend towards longer-term capitalizable projects with payback in future periods, including marketplace initiatives and re-platforming-projects, such as Reebok.
Share-based payments increased $13.1 million or 22.5 percent year-over-year in the second quarter 2023 primarily as a result of the impact of a share price increase on employment-related taxes and cash-settled awards during the period, compared to the impact of a share price decrease during second quarter 2022.
Depreciation and amortization expenses increased $9.7 million or 12.0 percent year-over-year in second quarter 2023. This was said t be principally due to increased technology investments, where qualifying technology development costs are capitalized and amortized over their useful lives.
Photo courtesy Farfetch
