Global Fashion Group Q4 revenue up but promotions hit margins

By

Sandra Halliday

Published
Apr 10, 2018

Rocket Internet's Luxembourg-based Global Fashion Group saw a strong revenues hike in Q4 with the final quarter accelerating slightly as revenue rose close to 23% rather than the almost 20% for the full year.

But the firm’s profit margins were dented as it invested in promotional pricing as well as adjustments to the product mix designed to deliver higher profit over the long term.

To make comparisons easier, the company’s Q4 sales figures exclude the Namshi business as Emaar Malls has acquired a controlling 51% stake in that unit.

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So what exactly happened last quarter? Group net revenue was €328 million and net merchandise value (NMV), which includes marketplace sales, was €337.7 million, up 23.7% on a constant currency pro forma basis.

And that certainly boosted headline profitability with the quarter’s EBITDA margin improving by 350 basis points. But the basic gross profit margin figure dipped for Q4 by 4.4 percentage points, largely due, as mentioned, to “price investments to trade effectively across our markets as well as product mix effects.”

This impact was “more than compensated by path-to-profit initiatives and scale benefits, which delivered the improvement in profitability,” the company said.

Looking at the group’s specific units, online fashion retailer Lamoda, which operates in Europe and Asia, said net revenue was €122.1 million for the quarter, up 16.2% on a constant currency basis. And NMV grew 11.9% to €116.1 million. 

South American unit Dafiti delivered net revenue and NMV growth on a constant currency basis of 18.2% and 22.1% to €108.4 million and €113.6 million respectively. This was driven by a successful Black Friday campaign in Brazil. Net Revenue and NMV grew to €365.2 million, up 12.5%, but again, the gross profit margin was down due to investment in competitive pricing across the region. This included key promotional events like Black Friday and Christmas promotions as well as product mix effects. 

Australasia’s Zalora and The Iconic delivered impressive growth rates in Q4 of 37.8% and 40.7% respectively for net revenue of €97.1 million and NMV of €108 million on a constant currency basis, with the gross profit margin also dented by promotional pricing.