Global Fashion Group says it is making progress towards profit

Global Fashion Group (GFG), the online fashion retailer focused on emerging markets, said it is working hard to reduce its losses as it reported second-quarter sales rose a currency-adjusted 16.5%.

Shares in GFG, which runs fashion websites in Russia, Latin America and south-east Asia and which listed on the Frankfurt stock exchange last month, rose 4%.

GFG said it was making progress towards break-even on its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA), after its loss ticked up to 3.2 million euro ($3.55 million) in the second quarter.

“We are well on track,” co-chief executive Christoph Barchewitz told journalists, noting that the company had already reached profitability in Latin America and Australia in 2018, but it would take more time in south-east Asia.

Revenue came in at 343 million euros, while net merchandise value - the value of products ordered on the GFG marketplace - rose 22.7% on a constant currency basis to 449 million euros.

GFG, set up by Sweden’s Kinnevik and Germany’s Rocket Internet, trimmed its forecast for 2019 capital expenditure to 80 million euros from a previous 90-95 million euros as it shifted some spending on a new warehouse in Brazil to 2020.

Barchewitz said he was not too concerned about a 2.2% fall in average order value to 50.5 euros, saying it was more important to focus on order frequency, which was up 8.8%.

“There is certainly a tradeoff between frequency and average order value,” he said, but added: “The economic model is working at these order values.”

Europe’s biggest online fashion site Zalando, on which GFG was modelled, has also seen a fall in average order value as customers shop more frequently from their smartphones, but buy less each time, denting its profitability.