Rocket-backed Global Fashion Group still unprofitable in 2016

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Global Fashion Group (GFG), the umbrella group that holds Rocket Internet-backed online fashion businesses worldwide, saw its revenue hit the US$1 billion mark in 2016, but it was still bleeding.

According to a financial report released today, GFG recorded a net revenue of US$1.09 billion last year, a 26 percent jump from US$862 million in 2015. Gross profit also rose 33 percent to US$462 million from US$348 million.

Profitability remained elusive for the group as it posted US$136 million in operating losses. The figure, however, was much lower than the previous year’s US$232 million losses.

GFG, which suffered a steep drop in valuation last year, consists of fashion ecommerce sites Dafiti in Latin America, Lamoda in Russia and CIS, Namshi in the Middle East, and Zalora and The Iconic in Asia-Pacific. The firm has been streamlining its presence in Asia – in particular, it sold Jabong in India and its Zalora businesses in Vietnam and Thailand.

Among the units, only Namshi reported operating profits or EBITDA of US$2.7 million. The rest recorded negative EBITDAs. GFG’s full-year results didn’t include Jabong’s financials.

Weighing on Rocket

The divestments and some fresh funds that Rocket and its regular investing partner Kinnevik pumped into GFG last year brought its year-end cash position to US$240 million, giving it some leeway. But the pressure is on for the fashion group to further cut its losses or break even, otherwise it’s likely to continue to hurt Rocket.

Rocket’s 2016 full-year numbers are expected to come out later this month, but its nine-month report pegged its losses for the period at nearly US$700 million due to the slump in GFG’s value.

Yet Rocket’s CEO Oliver Samwer is nothing but optimistic about the German startup factory’s prospects, saying last year he expects at least three of its portfolio companies to turn profitable by the end of 2017. He didn’t specify which companies he meant.

In the case of GFG, he said its last funding round would allow it to continue building its position as a “market leader in online fashion” in emerging markets. Zalora’s Philippines branch this year raised funds by selling new shares to local conglomerate Ayala.

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