Poland’s Allegro posts higher profit on return to growth at home

5:27 am Wednesday, November 30th, 2022

(Reuters) -Poland’s biggest e-commerce platform Allegro reported a rise in third-quarter core profit on Wednesday, driven by recovery in its home market and smaller losses at Mall, the Czech online retailer it acquired earlier this year.

Allegro, which bought Mall for 881 million euros ($1.02 billion), said it was focusing on reining in costs as it integrates the retailer into its business while bracing for a slowdown in consumer spending.

In the company’s home market, better delivery cost management and an increase in high-margin ad revenue powered a recovery in core profit.

Gross merchandise value (GMV), an industry metric to measure transaction volumes, jumped 21% in Poland to 12.01 billion zlotys in the third quarter.

The growth continued at a similar level in October before slowing down in November as shoppers likely postponed online browsing and purchases during the ongoing football World Cup, the company said.

“In November, we did start to see a slowdown in growth, we are still growing but not as fast as before,” finance chief Jon Eastick told Reuters, adding the slowdown will likely continue in the first half of next year.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 13.9% to 537.3 million zlotys ($119.16 million), beating expectations of 496 million zlotys in a company-compiled consensus.

BALANCE GROWTH

Allegro stuck to the annual outlook, which it had trimmed in September for the second time this year in anticipation of discretionary spending taking a hit from high inflation.

Finance chief Eastick said the company launched a project internally covering prioritisation, cost management and the way the organization is structured.

“We are working hard on the assumption that growth will be harder to achieve next year. Through this ‘fit to grow project’ we are looking for ways to make sure we balance the margins with the growth,” Eastick said, but declined to give a specific guidance.

Allegro said it was making progress with turnaround at Mall business, with core profit loss slowing down to 50 million zlotys compared with 62 million in the second quarter.

Its shares open 3% higher, but pared gains to trade flat, with Trigon brokerage’s Grzegorz Kujawski attributing it to investor worries around e-commerce growth next year.

(Reporting by Anna Pruchnicka; Editing by Kim Coghill, Nivedita Bhattacharjee and Arun Koyyur)