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Polish e-commerce firm Allegro eyes higher Q1 profit
Global Banking & Finance Review®
Company
By Anna Pruchnicka
(Reuters) -Poland’s biggest e-commerce platform Allegro said on Thursday it expects core earnings to rise in the first quarter, as it focuses on cost control amid continuing economic uncertainty.
Allegro is looking to keep costs down as it integrates the Mall Group business it bought last year and adapts to consumers spending less.
“There was what we call trading down starting to be more visible in the fourth quarter,” finance chief Jon Eastick said in an interview. “Category by category people are taking cheaper options because they know they need money for their energy bills and fuel cost.”
The company expects consumers to feel pressure this year, Eastick said.
Inflation around central Europe has surged in the past year, more than elsewhere in the continent, as food prices have jumped alongside energy costs. In Poland, Allegro’s largest market, inflation in February was 18.4% year on year, the highest in 26 years.
Allegro forecast its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to increase 20%-23% in its key Polish market.
Shares in the company were up 6.7% by 0748 GMT.
Gross merchandise value (GMV) — an industry metric used to measure transaction volumes — is expected to rise 13%-14%, while revenue is likely to increase 20%-22%, the company said.
Monthly GMV growth fluctuated between 12% and 15% for its Polish operations during the first quarter, the company said.
Allegro is also targeting lifting its margin in Poland back towards 5% mid-term, it said, which Eastick specified meant in two to five years. Adjusted EBITDA/GMV margin rose by 0.94 percentage points to 4.90% in the fourth quarter.
Under its “fit to grow” project Allegro plans to consolidate warehousing space and has made reductions in specific teams, including about 60 people in the technology team in the Czech Republic, Eastick said.
“We’re hiring for specific roles that need to be filled but generally speaking we are trying to control the number of people downwards, for example by not replacing people who leave,” Eastick said.
Allegro declined to comment on layoffs in the wider group. It had 7,840 employees at end 2022.
The company’s core earnings jumped 41.2% to 708 million zlotys ($163.70 million) in the fourth quarter in Poland, topping average analysts’ expectations of 692 million zlotys in a company-compiled consensus. Including Mall, the figure rose 33.3% to 668 million zlotys.
($1 = 4.3250 zlotys)
(Reporting by Anna Pruchnicka; Editing by Matt Scuffham, Uttaresh Venkateshwaran and Jacqueline Wong)
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a financial metric used to evaluate a company's operating performance.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is often measured by the Consumer Price Index (CPI).
Gross Merchandise Value (GMV) refers to the total sales dollar value for merchandise sold through a company's platform over a specific period.
Consumer spending is the total amount of money spent by households on goods and services. It is a key driver of economic growth.
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