Release Date: March 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Global Fashion Group SA (WBO:GFGT, Financial) achieved consistent quarterly improvement in gross margin, reaching a record 45.6% in Q4 2024.
- The company successfully reduced its total cost base by over EUR50 million, enhancing profitability.
- Strategic investments in high-return initiatives like the OWMS project improved fulfillment efficiencies.
- The company repurchased EUR124 million of convertible bonds at a 16% discount, strengthening its balance sheet.
- ANZ and LATAM regions returned to NMV growth in Q4, driven by strong Black Friday results and strategic initiatives.
Negative Points
- Active customers declined by 9% year-on-year, indicating challenges in customer retention.
- Order frequency reduced by 3% to 2.3 times in 2024, primarily due to weaker performance in Southeast Asia (SEA).
- SEA experienced a 17% year-on-year decline in NMV, highlighting significant regional challenges.
- The company decided to close operations in Chile due to post-COVID challenges and competitive pressures.
- Revenue for 2024 declined by 9% year-over-year on a constant currency basis, reflecting broader market challenges.
Q & A Highlights
Q: Can you provide an update on trading from Q4 into January and February across different markets and the consumer sentiment outlook for 2025?
A: Trading in the first two months of the year has continued similarly to Q4, with positive trends in LATAM and ANZ, and more challenges in Southeast Asia. Q1 is typically a smaller quarter for us, especially in southern hemisphere markets. In Southeast Asia, key trading events in March, like the Raya season and birthday sales, are significant. Consumer sentiment shows mixed signals, with Australia improving and Brazil showing mixed data points. We are confident in our positioning with a fresh assortment and low aged inventory.
Q: How will you implement the LATAM turnaround strategy in Southeast Asia, and are there any market-specific challenges?
A: While there is a blueprint from LATAM, Southeast Asia is a vastly different market. LATAM has more localized markets, whereas Southeast Asia is more integrated with stock sold across multiple geographies. We are leveraging group-wide experience, including from LATAM, to address competitive pricing and market characteristics. The focus in Southeast Asia is more on top-line turnaround, leveraging strong brand assets and customer engagement to drive loyalty and order frequency.
Q: Can you discuss the competitive environment in your regions and expectations for price inflation?
A: The competitive environment is rational, with many competitors focusing on profitability. We face competition from general merchandise players and brand.com platforms. Our unique positioning as a multi-brand pure player in fashion, sports, and lifestyle categories is a strength. Regarding inflation, we expect it to moderate or decline in most regions, except Brazil, where it remains relatively high at around 5%.
Q: What are the key levers to drive active customer growth as inflation recedes?
A: Active customer numbers are lagging indicators, but leading indicators in ANZ and LATAM have turned positive. We focus on tailored marketing strategies, re-energizing brands, and enhancing CRM with AI and automation for personalized customer engagement. Marketing costs may rise slightly to attract new customers and reduce churn, with successful campaigns like the master brand campaign in Australia.
Q: What is your cost reduction outlook for 2025, and are you targeting a reduction of 5% to 10%?
A: We continue our cost reduction program with strong controls across P&L and CapEx. Significant reductions are expected year-on-year, focusing on fulfillment, tech, and admin cost efficiencies.
Q: Why was the Chile operation not closed earlier, and are there plans to shut down additional regions?
A: We attempted to turn around Chile alongside Brazil and Colombia but did not achieve the same success. The decision to close was made after evaluating performance improvements in other regions. We are not planning to close additional markets currently but continuously review performance.
Q: Do you expect a positive group EBIT in Q4?
A: We had a positive adjusted EBITDA in Q4 and expect this trend to continue into 2025. Our primary objective is to achieve adjusted EBITDA break-even for the year, with positive EBIT to follow.
Q: Can you provide insights into the challenges in Southeast Asia and how you plan to strengthen your fashion and lifestyle position?
A: Each country in Southeast Asia has unique challenges, with Indonesia being the largest and highly competitive market. We focus on core fashion and lifestyle categories, moving away from adjacent categories. Strengthening our position involves offering a distinct assortment with exclusive brands and differentiated products, focusing on our top 30 brands.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
