Polish Ecommerce Company Allegro Reports ‘Lower’ Margins Amid Growth
- Third Quarter Net Profit Beats Forecast and Sticks to Yearly Forecast
- Expect “lower” margins next year
Nov. 9 (Reuters) – Polish e-commerce platform Allegro on Tuesday reported higher than forecast net profit for the third quarter, but stuck to its forecast and reported “lower” margins for the year next as she continued to invest, lowering her shares.
Allegro, which has become the go-to online market in Poland and is experiencing a sales boom accelerated by the pandemic, has invested in logistics and fintech to gain a competitive advantage and create new sources of revenue.
The company said the priority was to invest in the growth of the GMV (gross value of goods) through the basics of retail and the scaling of order fulfillment operations Allegro Pay, Allegro APM and Allegro, but operating margins could be lower in 2022.
Its shares, which have lost more than 40% so far this year due to competitive nervousness, were down 6% at 9.44am GMT.
“This is another quarter somewhat comparable to the second quarter in terms of closures, as shopping malls were closed throughout November of last year,” Reuters told Reuters. CFO Jon Eastick. “We therefore expect the growth rate of GMV to be a little lower in percentage terms than last year.”
“The absolute level of sales looks very promising and we look forward to a very successful Christmas sales period.”
Allegro posted third-quarter net profit of 324.4 million zlotys ($ 81.58 million), down from a loss of 132 million zlotys a year ago, and higher than analysts’ forecasts of 263 million zlotys .
The gross value of goods, an industry metric to measure transaction volumes, jumped 19.9 percent to 9.9 billion zlotys, as consumers continued to shop online despite the easing restrictions related to the pandemic.
But the company’s adjusted EBITDA / GMV margin (earnings before interest, taxes, depreciation and amortization) slipped to 4.77% from 4.95% due to higher costs.
Failure to update forecasts implies “fairly weak” GMV and fourth-quarter adjusted EBITDA momentum, mBank brokerage analyst Pawel Szpigiel told Reuters.
“In addition, management has stressed the priority of investing in the growth of GMV in 2022, which we see as a sign that profitability will decline,” he said.
Eastick said a plan to deploy 3,000 of Allegro’s own parcel lockers by 2022 was on track. He also said the group’s new Allegro Pay product appeared to be a very promising GMV pilot, with a typical Allegro Pay customer spending around 35% more than before joining Allegro Pay.
Eastick said he was not overly concerned with supply chain and logistics issues affecting many retailers as Allegro can source products from multiple vendors and merchants on his platform.
($ 1 = 3.9765 zlotys)
Reporting by Anna Pruchnicka in Gdansk; Editing by Sherry Jacob-Phillips and Jane Merriman
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