Global Fashion Group S.A., the leading online fashion and lifestyle destination in growth markets, delivered its results for the three-month period ended 31st March 2020 and provided an update on the business impact of the COVID-19 pandemic.
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Christoph Barchewitz and Patrick Schmidt, Co-CEOs of GFG said: “GFG has had a good start to the year, trading in line with our expectations until mid-March. We have continued to deliver against our strategic priorities, with strong growth across NMV, Revenue, Frequency, Active Customers and Order, while improving profitability.”
“While the group was trading in line with management expectations until mid-March, GFG’s Q1 results were negatively impacted across each of the regions at different times by the COVID-19 pandemic, and by currency headwinds that resulted in a drag on NMV of around €20 million. The 300bps improvement in Gross Margin was driven by higher Marketplace penetration, stable Retail gross margin, and a one-off inventory provision in Q1 2019 relating to a business discontinued pre-IPO. The improved Adjusted EBITDA performance was driven primarily by a higher Gross Margin, partially offset by an increased fulfilment cost income ratio, reflecting the accounting treatment of Marketplace revenue,” continued Christoph.
The pandemic has had a similar impact on demand across all GFG markets, albeit at slightly different times and with different severity. While reported NMV is based on delivery, GFG measures customer demand by the Order Intake, the total value of customer orders (including VAT and sales taxes) and net of provisioned returns and rejections at the date of a customer order. The weekly Order Intake declined for three weeks in late March and early April, started to recover in the second week of April and then accelerated strongly in the second half of April and early May, with growth around 40% compared to last year for the last three weeks to 10th May.
Once the initial shock of lockdown passed, customers returned to GFG platforms but with different needs, and an increased demand for categories like sport, wellness and loungewear – while categories like dresses or formal wear saw significant declines. At the same time, GFG experienced a significant increase in new customers trying its services for the first time. In April, the Group acquired more than 650,000 new customers, almost 50% more than in that month last year.
GFG’s major fulfillment centres in Australia, Malaysia, Brazil and Russia have operated without interruptions. Only two of the smaller fulfillment centers in Argentina and the Philippines were closed, for around 30 and 40 days respectively, resulting in a minor impact on NMV as order delivery had to be delayed until the re-opening in late April.
Further to the trading update on 31 March, GFG has taken action to reduce budgeted costs and investment as a result of this period of uncertainty. €40 million year-on-year reduction in marketing, tech and general & administrative costs; Capex investment for FY 2020 has been reduced to no more than €45 million; and
Q2 Inventory intake reduction of c.€90 million.
By working collaboratively with brand partners through these industry-changing times, GFG has been providing innovative solutions to enable brands to continue selling when much of bricks & mortar retail is closed. Through an acceleration to its Marketplace model during Q1 and into Q2, GFG’s brand partners have been able to build their online presence and reach GFG’s 13 million Active Customers with an increased proportion of their range. This shift has also enabled GFG to offer a wider, more flexible assortment and avoid greater inventory risk.
As demand for athleisure, sportswear and loungewear has increased, GFG continues to deliver inspiring customer experiences by adjusting its assortment accordingly to bring the most relevant products to customers. This includes accelerating roll-outs of planned new product ranges and introducing new essentials categories to support their well-being and lifestyle needs at home.
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With the accelerated consumer shift from offline to online, innovations in technology have never been more important. GFG continues to strengthen its app-first approach by adapting communications to inspire and support customers who are spending significantly more time at home. In Q1, GFG apps generated 58% of NMV (Q1 19: 46%) and customer purchase frequency was up by 2.7%, with a 5.2% increase in average order value.