Allegro Slashes Value of Czech Acquisition Despite 25% YoY Growth

Allegro has written down the value of Mall Group and WE|DO by 56%.

In a third-quarter (Q3) earnings statement released on Wednesday (Nov. 30), the Polish eCommerce company noted a 2.3 billion zlotych ($510 million) write-down on the value of the Czech online retailer and logistics company it acquired in a 867 million euro ($899 million) takeover earlier this year.

“In the face of rising costs of capital, a full-scale cost of living crisis and the macroeconomic challenges across Europe, compounded by the continuing war in Ukraine, we have taken the decision to recognize a fall in value of our investment in Mall Group and WE|DO by more than half,” Allegro CFO Jon Eastick told investors and analysts on today’s earnings call.

He appeared to justify the decision by saying many of Allegro’s eCommerce peers “have fallen in market value by between 50 and 70% since we committed to the acquisition a year ago.”

That said, Mall Group sales have steadily increased while the company has managed to reduce losses by improving first-party margins — reasons why Eastick said the firm remains committed to leveraging the acquisition to expand the local business ahead of rolling out a third-party marketplace model next year.

Low Prices and BNPL Keep Polish Business Competitive

The Polish market is undoubtedly suffering from the same slump in consumer sentiment being experienced across Europe, as well as inflation that is outpacing many of its European neighbors. But Allegro seems to have a large range of bases covered, buoyed by the 260 million listings on the platforms for essential goods and items.

According to the report, continued growth in the market helped to reduce the impact of a drop in Q3 earnings created by the Mall Group impairment. There, the marketplace operator has been able to fend off competition from international rivals and boasted year-over-year (YoY) earnings growth of 25% in the quarter.

Related: Amazon EU’s Expansion Faces Stiff Competition From Regional eCommerce Retailers

Per the report, 9 out of 10 best-sellers available on Allegro are at the lowest market prices in Poland, further giving the company an edge over competitors.

The firm’s buy now, pay later (BNPL) offering, Allegro Pay, also appears to have benefitted from Poles tightening their purse strings and opting to spread the cost of their purchases. Data from the report shows that buyers took out over 1.4 billion zlotych ($310 million) worth of loans via the service in Q3 — a 156% YoY rise.

But despite that increase, the figure nonetheless represents a slowdown in growth for Allegro Pay, considering the company reported a 260% YoY growth in Q2 earlier this year.

However, Allegro CEO Roy Perticucci appeared optimistic about the future, saying that the firm “remains the best solution when it comes to tackling the rising everyday costs” and its “business model proves to be the best solution for both buyers and merchants facing inflationary pressures.”

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