Global Fashion Group make big stride towards profitability
Global Fashion Group had big news on Tuesday as it announced that it had reached break-even in the fourth quarter and that its strong growth was continuing.
Actually, although the headline of its results report was that it broke even, it actually delivered slightly positive adjusted EBITDA of €0.7 million. It was the first quarter that the company, which operates online retail brands including Zalora, The Iconic, Dafiti, and Lamoda, hadn’t made a loss so it really was a big deal.
Its net merchandise value (NMV) increased by 22.9% on a constant currency basis to €554 million, while revenue growth in the quarter was 17.7% (also on a constant currency basis) to €417.7 million.
GFG operates across Asia, in Latin America and Eastern Europe (in the Commonwealth of Independent States, or CIS) and saw record active customer growth of 17% to 13.1 million while orders were up by 20.3% to 10.3 million.
The performance in the final quarter topped off a year in which it had also improved generally. During the year, NMV increased by 23% on a constant currency basis to €1.778 billion, while revenue of €1.346 billion was up 17.2%. And it boosted its full-year adjusted EBITDA margin by 1.5ppt to -2.8%, with three of four regions breaking even. Adjusted EBITDA itself was a narrower loss of €37.1 million after a loss of €49.8 million in the previous year.
Co-CEOs Christoph Barchewitz and Patrick Schmidt, said: “We had a great fourth quarter. We delivered our fastest growth in active customers, orders and NMV in three years following our biggest-ever seasonal events period. Our continued growth brings us closer to our vision of becoming the #1 fashion & lifestyle destination in our markets. We remain focused on building our leadership position through ongoing investment across the entire customer experience — from discovery to delivery, and strengthening our path to profitability even further.”
As they said, the strong finish to the year was fuelled by a record seasonal events period, including Black Friday and Cyber Week across all of GFG's markets, as well as 10.10, 11.11 and 12.12 in Southeast Asia specifically. With more than 70 million site visits and over 2 million processed orders, this seasonal period generated NMV growth of 36% year-on-year.
During 2019, GFG said it continued to expand its assortment, offering both locally-relevant and global brands. For instance, most recently it provided exclusive customer access to Ralph Lauren and Gap in Latin America, and Swatch in CIS, where the company also rolled out its Beauty category through the launch of Estée Lauder. In Apac, further development of the modest fashion segment saw the launch of GFG's first male modest wear collection. And it introduced its first resale model on its Zalora platform with over 10,000 “pre-loved” items targeted at the 200 million internet shoppers in Southeast Asia, while The Iconic launched its sustainable Considered brand and the company unveiled its first sustainable own-brand, Aere.
The group ended the year with available cash of €300.8 million and said it aims to grow NMV between 17% and 20% this year, delivering more than €2 billion in NMV and around €1.5 billion revenue at constant currency.
But the impact on the Australian consumer of the bushfires, together with a warm winter in CIS means it’s expecting the year to start around the lower end of this range. But it also plans “to make significant progress on the path to profitability in 2020, with the target of being profitable at an adjusted EBITDA level no later than 2021”. That guidance excludes any potential negative impact caused by the COVID-19 outbreak, however.
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