Allegro Eyes Higher First Quarter Profit, Shares Rise

By Reuters
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Allegro Eyes Higher First Quarter Profit, Shares Rise

Poland's biggest e-commerce platform Allegro said it expects core earnings to rise in the first quarter as it focuses on cost control, sending its shares up as much as 15% on Thursday.

Allegro is looking to keep costs down as it integrates the Mall Group business it bought last year and adapts to consumers spending less.

By 1232 GMT shares were up 13.9%, on track for their biggest percentage gain since July 2022.

Consumers Feel Pressure

"There was what we call trading down starting to be more visible in the fourth quarter," finance chief Jon Eastick said in an interview. "Category by category people are taking cheaper options because they know they need money for their energy bills and fuel cost."

The company expects consumers to feel pressure this year, Eastick said.


Polish Market

Inflation around central Europe has surged, more than elsewhere in the continent, as food prices have jumped alongside energy costs. In Poland, Allegro's largest market, inflation in February was 18.4% year on year, the highest in 26 years.

Allegro forecast its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to increase 20%-23% in its key Polish market.


Gross merchandise value (GMV) — an industry metric used to measure transaction volumes — is expected to rise 13%-14%, while revenue is likely to increase 20%-22%, the company said.

Investors liked the company's GMV and profit guidance given the latest indication from Poland's statistics office had shown a decline in online sales in January and February, said Dominik Niszcz, a senior analyst at brokerage Trigon DM.


Continuing Costs Cuts

He also pointed to continuing costs cuts, including lower growth dynamic of marketing and staff costs, as well as "careful" capex guidance.

Under its "fit to grow" project Allegro plans to consolidate warehousing space and has made reductions in specific teams, including about 60 people in the technology team in the Czech Republic, Eastick said.

"We're hiring for specific roles that need to be filled but generally speaking we are trying to control the number of people downwards, for example by not replacing people who leave," Eastick said.


Allegro declined to comment on layoffs in the wider group. It had 7,840 employees at end 2022.


The company's core earnings jumped 41.2% to 708 million zlotys (€151 million) in the fourth quarter in Poland, topping average analysts' expectations of 692 million zlotys in a company-compiled consensus.

Including Mall, the figure rose 33.3% to 668 million zlotys.

News by Reuters, edited by ESM – your source for the latest retail news. Click subscribe to sign up to ESM: European Supermarket Magazine.

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