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196. Bull, Bear & Beyond – Global Fashion Group: executive interview
11 Plays8 days ago
In our interview, Global Fashion Group’s CEO, Christoph Barchewitz, and CFO Helen Hickman discuss the FY25 results, progress made in its three geographic regions during the year, as well as the outlook for the current year and the medium term. FY25 was an important year for Global Fashion Group as the restructuring and transformation delivered an overall adjusted EBITDA profit, as well as a profit in all three regions for the first time with its current geographic exposure. Management’s expectations for further growth in profitability and lower levels of cash consumption should support a re-rating of the company’s valuation, which remains at a significant discount to its online fashion peers.
Global Fashion Group operates leading fashion and lifestyle e-commerce platforms in nine countries across three regions (Australia and New Zealand, Latin America and South-East Asia) with high growth potential. Its platforms enable global and local brands, complemented by the company’s own brands, to reach customers in markets with no capital investment.
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About ‘Bull, Bear & Beyond’
Bull, Bear & Beyond': features candid conversations with senior executives and from our own team of experts from across industries, exploring strategy, innovation, and the opportunities shaping their markets and 60-second pieces are a compressed summary of content designed to convey our message in a single, easily shareable hit.
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Transcript
Introduction of Key Executives
00:00:07
Speaker
Hello, I'm Russell Poynter from Edison Group. And once again, it's great to have the management of Global Fashion Group with us. We have Christoph Bartschewitz, who's the CEO. And for the first time, we have Helen Hickman, who's the CFO of Global Fashion Group. So welcome both.
00:00:23
Speaker
Welcome. Thank you. Thank you.
FY25 Financial Highlights
00:00:25
Speaker
So let's start with the results were published yesterday, as I said, and FY25 looks like a very good year of progress from an operations perspective and a financial perspective. So could you just talk about, you know, gives ah give a bit of a a summary of the journey you've been on in the last three years to get to where you are today? Definitely. So um from between 23 and 25, we've been operating um with some demand pressures um and our NMVs for our top lines declined over that time for about 168 million. And about half of that actually has been FX. So we've seen devaluation of currencies against the euro.
00:01:07
Speaker
Against though that declining backdrop of sales, we've really stepped forward both our profitability position and also our cash position. So we've moved forward on profitability by 62 million euro.
Operational Improvements and Profitability
00:01:21
Speaker
And I'm excited to say, as you mentioned, that in 2025, we were adjusted EBITDA profitable at both the group level and also each of our three regions were also profitable at that level. um That's then translated into a significant reduction in our cash outflow um by 30 million. So we reported yesterday a 32 million operational cash um cashche outflow. And we've been able to make that pivot around profit and cash.
00:01:52
Speaker
across both gross margin and operational cost base. So we saw a four percentage point improvement in gross margin and we've been very disciplined around cost and efficiency and taken out just over a hundred million of cost over that timeframe.
Regional Success Stories: ANZ
00:02:08
Speaker
Great. Thanks, Alan. So, Christophe, let's move on to the three regions, different dynamics in all of them. First one, the biggest, Australia, New Zealand. to some extent, it's probably a bit quite easy to take it for granted and then it keeps on growing and it's the most profitable. So could you just talk about ah what's happened in the last 12 months and to drive that profitability and the good performance from the KPI perspective?
00:02:31
Speaker
Yes, um we're very excited about Australia. and know As you said, it's the profit engine and the growth engine of the group. 6% growth last year, very strong EBITDA performance, stepping forward on gross margin as well to a record 49%. So we're very, very pleased with the financial performance. But I think equally important, if not more important, is really the initiatives behind that. So the platform transition towards a higher share of marketplace now touching on nearly 40 percent um is ah very pleasing because it ultimately brings more assortment without putting money into and into inventory. um to the customer. We've made a lot of progress on delivery, so we've upgraded that in our partnership mainly with Australia Post.
00:03:16
Speaker
We launched just recently Saturday delivery, which is not a common thing in Australia, especially in the fashion e-commerce world. um And we've also upgraded the experience for our customers in New Zealand. And so all of that is clearly helping. We have also done a lot of further work around the customer. We launched a new loyalty program in October last year, so it's still early days.
00:03:39
Speaker
But the intention behind this is really to drive order frequency where we think we still have room for growth going forward. And we're also very excited by our continuing, got you looking, master brand campaign initiatives, which has been a big driver of the return to growth over the last few years. And we think there's more in that that we can bring to the customer to really articulate the proposition very broadly across categories, the delivery promise, the brands that we have. And so very excited about the journey ahead for Australia in New Zealand.
Customer Engagement Strategies
00:04:14
Speaker
And moving on to Latan, the active customer numbers there tend to be a little volatile and is' still showing that, so but still growing. The business is still growing and moving in as in profit. Could you talk about what you're doing to um counter that competitive environment that you've you've talked about?
00:04:30
Speaker
Yeah, it's ah it's a very competitive market as you say. i think what's very important is we look at, we talk a lot about the active customer and that's you know somewhat of a lagging indicator um and is only part of the story. The other part of the story is really the order frequency and our order frequency for the group is at about 2.3 orders per year. It is a bit lower than that in LATAM, but it's actually grown 5% last year. So, there's a bit of a trade-off and we are really focusing on the higher value customers and engaging them on a more frequent basis um to to drive growth through not only the active customer number, but the number of orders and the order frequency and the loyalty. that comes with that. um One way of doing that is um through the assortment. you know That is front and center in our business. We're continuing to sharpen that, drive more exclusivity, articulate it better to the customer, and then also really cater through what we call Club da Fiji as a branding, um a trigger to buy more quickly and and um really have exclusive offers that come at a great price.
00:05:36
Speaker
but also exclusive in terms of the product that is being offered. And these initiatives have really helped us drive the growth last year and will be a part of the the journey this year
Overcoming Challenges with Campaigns
00:05:47
Speaker
as well.
00:05:47
Speaker
Okay. And finally, from a regional perspective, Southeast Asia where the customer trends are still ah negative, but there's a new CEO who's been in for a few months now.
00:05:58
Speaker
um The business, you know, gross profit went up, so that that's good. Could you just give some insight into what's actually happening in the Southeast Asia business? Yeah, as you say, i mean, we've we've definitely faced a good amount of challenges and that's ah reflected in the top line. The decline has been moderated in q four so we see a bit of progress there and Q4 is obviously critical ah part of the year from a seasonal perspective.
00:06:21
Speaker
What's behind that are our whole range of initiatives. We're focusing more heavily on our 30 largest brand partners in the region and really making sure that across that core of our business, we have the most relevant assortment, we have great pricing, we bring newness in a very frequent way.
00:06:40
Speaker
And that kind of side of the merchandising and the assortment has been a big focus of our new CEO and the whole team. ah We are also reinvigorating the brand ah position that we have. um We have launched a Southeast Asian version of the Got You Looking campaign just very recently. We're currently going through another key trading season. We just had Lunar New Year.
00:07:02
Speaker
We have the Raya Ramadan season currently. So there's all these touch points where we can retell the story of what we are about, which is fundamentally you know the best global and local brands for the consumer in Southeast Asia. And so there's more work to do, but I think we're very pleased that the actions we are taking are showing some results and we're doing that while actually maintaining a positive EBITDA position.
00:07:26
Speaker
Great. thanks Thanks for the update on the regions,
Profitability Focus: Margins and Growth
00:07:29
Speaker
Christoph. ah Helen, could we touch on the the financials and the outlook for this year? so Essentially at the midpoints, you've done what you did last year and guided to and no growth on a constant currency basis with ah with a range around that, but you're still expecting another year of profit growth. So perhaps it'd be worthwhile just talking about what those levers are to getting the EBITDA margin moving up again this Yes, definitely. So um just to recap, so our and NMV guidance for the year is between minus four and plus 4% on a constant currency basis.
00:08:00
Speaker
And profit is between 15 and 25 million and stepping forward from the 9 million that we generated in 25. So very much our focus around improving that profitability falls within the similar buckets that actually have, that we've seen over the last two, three years. So improvement in our gross margin,
00:08:21
Speaker
That then really stems across real strong execution of our retail assortment. So we've landed the year with a strong inventory position, relatively low aged inventory. So we're in a good place to be able to trade that well. And then also a focus around our marketplace and our platform services business. And as they grow within and as a proportion of our business, they're also accretive to our gross margin.
00:08:47
Speaker
We're also continuing the cost and efficiency program, which very much now is sort of embedded in DNA um within the organization. So we've got a series of focus areas with regards efficiency and discipline around costs that will also help step forward the profitability.
Path to Medium-Term Goals
00:09:03
Speaker
Okay.
00:09:04
Speaker
And with this respect to that medium-term guidance that you've had in place for quite a while, i mean, we had a good year of progress this year, so could you just talk about the building blocks into that medium-term guidance and whether you you're still confident in that medium-term guidance? Yeah, definitely. So yes, we're definitely still confident in that. um from a business model perspective um it's very much around working towards and sort of a a gross margin of 47 plus so we're very much well on the way with that with the step change that we saw this year um improving our marketplace participation so
00:09:39
Speaker
ah sort of with a target of about 45%, so we're just under 40 at the moment. And then also moving forward um with platform services as a proportion of our overall revenue. So from a business model perspective, that's where that lies. We've got the customer flywheel, so how actually we really focus around loyal and profitable customers to be able to generate incremental profitability. And then lastly, our cost focus and that i that I've touched on.
00:10:10
Speaker
And how we're thinking internally a little bit about our cash targets is less around sort of percentage adjusted EBITDA margin, but more about quantum. So we know that in 2025, our operating cash outflow was 30 million, over 30 million.
00:10:27
Speaker
And our Below adjusted EBITDA, the components of that are relatively fixed now. So we've done a lot of work to optimise our lease profile, our capex. So ongoing, they'll run at about 30 million in aggregate, as they did in 2025. We've got um ongoing tax and interest commitments of about 13 million. So, really, if we closed last year at a some minus 30, we need to be able to generate broadly 30 million more profit, assuming relatively stable working capital, which very much is a sort of long to mid-term guidance to be able to deliver just EBITDA, sorry, and normalized fee cash flow break-even.
00:11:09
Speaker
Okay, that's great. Thank
Regional Market Overview and Future Plans
00:11:10
Speaker
you. So, so Christoph, so there's been a good year of progress. So if we had this interview last year, um can we just sort of talk, could you just talk about where we are versus what your expectations might have been 12 months ago for the three regions?
00:11:26
Speaker
Yeah, I think we made progress across all markets, but I would say we have pretty much delivered and maybe in some aspects outperformed our ambition in ANZ as the largest market.
00:11:38
Speaker
um And really the balance of growth and profitability and the consistency of that through the year has been the most pleasing part of that, I would say, plus the confidence that we have many initiatives and opportunities to go further in a market that frankly is not as big as the other two regions, but where there is still a lot of room for growth and an improvement of our proposition.
00:11:58
Speaker
um I would say in LATAM, it's been a little bit less consistent and you see that a little bit on the trends quarter on quarter. We've largely gotten to where we wanted to get to, but we certainly have to do more work around the proposition and in particular the customer flywheel that Helen mentioned in that market and that's something we're really focused on for this year. And then Southeast Asia, um we clearly had a bit of different expectations of how it's going to play out.
00:12:23
Speaker
12 months ago, um we understood that, you know, in the first couple months of the year, we took significant actions, including on the cost side through the year. So, I think we fundamentally landed at a place where the top line was a bit weaker than we expected, but we got to a quite similar place on the bottom line because of the actions through the year.
00:12:42
Speaker
And I have more confidence today that we have a clear plan of what we're going to do this year than I would have had 12 months ago. So, there's been good progress in the smallest region as well. Well, thank you. So Christophe and Helen, thank you for coming in today and we look forward to speaking again soon.
00:12:58
Speaker
Thank you. Thanks for having us.