Emerging Markets Retailer GFG Prepares for IPO

FRANKFURT, Germany – Asia and Latin America focused online retailer, Global Fashion Group (GFG), has yet to make a profit and is preparing to list shares in Frankfurt to raise funds for further growth, the company said on Monday.

Online fashion retail has grown rapidly in the last decade, particularly in developed economies with strong logistics networks. However, it has proven tougher to turn a profit in places where parcel delivery can be unreliable.

Swedish investor Kinnevik, which owns 35 percent of the company, valued GFG at €1 billion (around £1.1 billion) in March, or 0.7 times the company's 2018 revenues. That compares to a range of 1.1-2.7 times for Western-focused peers such as Zalando, ASOS, Boohoo and Stitch Fix.

GFG, which is also 20 percent owned by German start-up incubator Rocket Internet and operates The Iconic, Zalora, Dafiti and Lamoda platforms, said it was planning to raise about 300 million euros ($335 million) from the sale of new shares.

The company has strategic partnerships with four of the five top 50 global non-luxury brands, setting it apart from general commerce retailers like Alibaba or Amazon.

It is banking on the rise of online retail in its key markets where internet sales currently stand at just 6 percent, compared to 15-39 percent in Europe, the United States and China.

"It is still very early days for fashion and lifestyle e-commerce in our markets. Today, most of our markets have less e-commerce adoption than Europe had 10 years ago," Co-Chief Executive Officer Christoph Barchewitz said.

GFG, which has 11.2 million active customers, last year posted 1.16 billion euros in sales and an adjusted EBITDA margin of minus 4.3 percent.

This year it is targeting sales of more than €1.3 billion (around £1.5 billion) and a smaller loss. The company has not yet said when it aims to break even.

"Global Fashion Group has shown significant progress on its road to profitable growth in the past year," Kinnevik’s CEO Georgi Ganev said.

Goldman Sachs, Morgan Stanley and Berenberg are organising the listing with the help of HSBC. ($1 = 0.8950 euros)