Mail Stop 3561
June 29,
2018
Jos Neves
Chief Executive Officer
Farfetch Limited
The Bower
211 Old Street
London EC1V 9NR, UK
Re: Farfetch Limited
Draft Registration Statement on Form F-1
Submitted May 30, 2018
CIK No. 0001740915
Dear Mr. Neves:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
General
1. Please supplementally provide us with copies of all written
communications, as defined
in Rule 405 under the Securities Act, that you, or anyone
authorized to do so on your
behalf, present to potential investors in reliance on Section
5(d) of the Securities Act,
whether or not they retain copies of the communications.
Prospectus Summary, page 1
2. We note your discussion on page 158 concerning the enforcement of
civil liabilities.
Please include in this section a brief statement concerning the
enforceability of civil
liabilities against foreign persons.
Jos Neves
Farfetch Limited
June 29, 2018
Page 2
3. Please provide support for the qualitative and competitive position
statements contained
in your prospectus. Specifically, disclose the basis for your assertions
that you are the
"leading technology platform for the global luxury fashion industry,"
and "we operate the
only truly global luxury digital marketplace at scale" and describe what
measure you are
using in making these statements. In this regard, disclose whether this
information is
based upon management's belief, industry data, reports/articles or any
other source. If
the statement is based upon management's belief, please indicate that
this is the case and
include an explanation for the basis of such belief.
Use of Proceeds, page 58
4. It appears that you have no specific plan for your use of proceeds, as
such please revise
your disclosure to discuss the principal reasons for the offering.
Please refer to Item
3.C.1 of Form 20-F.
Selected Consolidated Financial and Operating Data, page 63
5. Please tell us how you have met the requirement of Item 3.A.2 of Form
20-F to disclose
both net assets and capital stock.
Management's Discussion & Analysis
6. Here or in an appropriate section of your prospectus, please revise to
disclose whether
mobile sales generate a material portion of your Adjusted Platform
Revenues and, if so,
disclose this amount.
Our Business Model, page 67
7. In an appropriate place in your prospectus, please tell us how you plan
to monetize your
Farfetch Store of the Future concept and clarify what services for the
consumer or luxury
retailer will drive such monetization.
Factors Affecting our Financial Condition and Results of Operation
Growth and Quality of our Luxury Supply, page 69
8. Tell us why you differentiate between retailers and brands and to what
extent this
differentiation is apparent to the consumer. If your commissions or any
other measure of
financial performance differs depending upon the whether you are
engaging with a
retailer or brand, please explain how this impacts your results of
operation.
Growth and Quality of our Luxury Supply, page 69
9. Please add a footnote to or include in the accompanying narrative
discussion of your
stock value chart how you calculate stock value.
Jos Neves
Farfetch Limited
June 29, 2018
Page 3
Cost of Consumer Acquisition and Engagement, page 71
10. Revise your disclosure to explain how you arrived at your six month
LTV/CAC ratios for
the years ended December 31, 2015 and 2016. Given the more recent
growth in your
Adjusted Platform Revenue, provide narrative disclosure that explains
how readers
should interpret these metrics, especially given that December 31, 2017
information has
not been provided yet.
Key Operating and Financial Metrics, page 75
11. Please expand your definition of "Third-Party Take Rate" to define
revenue from first
party sales. Please also make it clear why the revenue realized from
first-party sales is
equal to the GMV of such sales.
12. You state that platform fulfilment revenue is net of consumer
promotional incentives
such as free shipping and promotional codes. Please explain to us how
promotional
incentives are reflected in your consolidated statements of operations
and how you are
netting such items with revenue.
Components of our Results of Operations
Revenue, page 76
13. Elaborate upon the terms of the commissions you generate on sales. For
example,
explain your reference to "blended commissions," on page 79.
Results of Operations, page 78
14. Please revise your discussion of results of operations to provide more
insight to your
investors on the causes of increases or decreases in each components of
net income. For
example, when you identify intermediate causes of changes in revenues,
such as an
increase in GMV, third-party take rate, or active consumers, please
provide your
investors with insight into the underlying drivers of those changes. In
this regard please
make it clear whether the increase in the third party take rate was due
to pricing actions
taken by the company or the result of increased volume.
Demand Generation Expense, page 79
15. Elaborate upon your indication that you gained efficiencies in your
performance
marketing spend "through increased sophistication in consumer
segmentation and more
focus on costs at a channel-by-channel level."
Jos Neves
Farfetch Limited
June 29, 2018
Page 4
Adjusted EBITDA, page 81
16. Your discussion of Adjusted EBIDA in total and as a percentage of
revenue is unclear as
to what you mean by "investment supporting growth in both GMV and
Adjusted
Revenue" and "leverage operation synergies" in terms of the
year-to-year fluctuations in
these two metrics. Please revise to be more explanatory.
Business
Applications, page 93
17. Elaborate upon the "individual off-the-shelf elements to full-service
branded ecommerce
solutions," you describe in your discussion of Farfetch Black and
White. Explain
whether you have monetized these solutions.
Our Products, page 100
18. Please explain how your app's contribution to your GMV has increased
from 13% to
27%.
Competition, page 110
19. We note your statement that your "global platform has no direct
competition in luxury
fashion." However, it appears that you have many online competitors
that offer luxury
fashion merchandise. Please expand your discussion to better reflect
the competitive
market that you operate in.
Our Strategy in China and Relationship with JD.com, page 112
20. Elaborate upon the nature of the services that JD.com provides to you
and for what
consideration, with a view to understanding the importance of this
partnership to your
business.
Consolidated Financial Statements
21. We note that you have provided financial statements for Farfetch.com
Limited, a private
limited company incorporated in the Isle of Man. Please tell us whether
you considered
presenting audited financial statements of Farfetch Limited, the
registrant, or at a
minimum an audited balance sheet to comply with Rule 3-01(a) of
Regulation S-X. If
you believe that audited registrant financial statements may be omitted
from your filing,
please explain your reasoning to us.
Jos Neves
Farfetch Limited
June 29, 2018
Page 5
Notes to the consolidated financial statements
Note 2.3. Summary of significant accounting policies
e) Revenue recognition, page F-12
22. You state that "Additional non-delivery services .....are not distinct
and are therefore
recognized on a gross basis." Please explain to us the significance of
this statement.
Note 6. Segmental and geographical information, page F-28
23. We note that you have identified four operating segments of (1)
Farfetch Marketplace, (2)
Farfetch Black & White, (3) Farfetch Store of the Future and (4) Browns
Stores. We
further note your disclosure that as Farfetch Marketplace represents
over 90% of revenue,
results and assets and you have presented one reportable segment with
all operating
segments included. Please tell us if these other segments meet most or
all of the criteria
in IFRS 8 paragraph 12 to be aggregated with each other or the Farfetch
Marketplace,
respectively. See IFRS 8 paragraph 14. Please also explain why you
believe it is more
appropriate to aggregate with the Farfetch Marketplace as opposed to
presentation as "all
other" category as contemplated in IFRS 8 paragraph 16.
24. You disclose revenue from external customers based on consumer
location. You further
disclose UK revenue based on location of sale to your brands and
boutiques. Please
explain to us in detail what this further disclosure means and how it
differs from the
revenue based on consumer location. Please consider rewording the
disclosure to be
clearer.
Note 29. Share options equity and cash settled, page F-46
25. We note that you have share based payments and have identified this as
a critical
accounting judgement in Note 3 on page F-20. Please update your
disclosure to include
the methods that management used to determine the fair value of the
company's shares
and the nature of the material assumptions involved. Please also
disclose the extent to
which the estimates are considered highly complex and subjective and
that the estimates
will not be necessary to determine the fair value of new awards once
the underlying
shares begin trading.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
Jos Neves
Farfetch Limited
June 29, 2018
Page 6
Please contact Lisa Sellars, Staff Accountant, at (202) 551-3348 or me,
Senior Assistant
Chief Accountant, at (202) 551-3849 if you have questions regarding comments on
the financial
statements and related matters. Please contact Scott Anderegg, Attorney
Adviser, at (202) 551-
3342, or Mara L. Ransom, Assistant Director at (202) 551-3720 if you have
questions regarding
the comments.
Sincerely,
/s/ James Allegretto
James Allegretto
Senior Assistant
Chief Accountant
Office of Consumer
Products