Cost Savings And AI Integration Will Improve ANZ Operations

Key Takeaways

• Emphasis on flexibility and AI integration aims to enhance agility, improve net margins, and boost revenue growth.
  
• Strategic efficiencies in fulfillment and targeted campaigns focus on reducing costs and increasing customer growth, particularly in ANZ and LATAM regions.
  
• Declining customer base and ongoing profitability challenges amidst global uncertainty could pressure liquidity and growth, affecting long-term revenue and margins.

Catalysts

Operates e-commerce platforms for fashion and lifestyle markets in Latin America, Southeast Asia, Australia, and New Zealand.

• The company is focusing on increasing flexibility and marketplace initiatives, which could lead to a more agile response to supply and demand changes, potentially improving revenue growth and net margins.
  
• Strategic cost-saving initiatives and efficiency improvements in fulfillment operations, particularly in Australia, are expected to reduce costs and improve EBITDA margins.
  
• The integration of AI tools for personalization, pricing, and efficiency is seen as a way to enhance productivity and customer experience, potentially increasing revenue and improving net margins over time.
  
• Active customer growth in regions like ANZ, driven by targeted campaigns and improved customer engagement, indicates potential future revenue growth.
  
• LATAM and ANZ regions have experienced significant NMV growth, suggesting a positive trajectory in these markets that could contribute to overall revenue growth and improved earnings in the future.

Global Fashion Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Global Fashion Group's revenue will decrease by 1.7% annually over the next 3 years.
• Analysts are not forecasting that Global Fashion Group will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Global Fashion Group's profit margin will increase from -11.0% to the average DE Specialty Retail industry of 2.6% in 3 years.
• If Global Fashion Group's profit margin were to converge on the industry average, you could expect earnings to reach €18.5 million (and earnings per share of €0.08) by about May 2028, up from €-81.5 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 4.8x on those 2028 earnings, up from -0.7x today. This future PE is lower than the current PE for the DE Specialty Retail industry at 19.5x.
• Analysts expect the number of shares outstanding to decline by 0.1% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.75%, as per the Simply Wall St company report.

Global Fashion Group Future Earnings Per Share Growth

Risks

• Despite NMV growth, Global Fashion Group's active customer base is declining, down 5.2% year-over-year, which could pose a risk to long-term revenue growth.
  
• The company's adjusted EBITDA margin, though improved, is still negative at 7.3%, indicating ongoing profitability challenges that could affect earnings.
  
• Q1's normalized free cash flow was negative €61 million, showing significant cash outflows which could pressure liquidity if not improved significantly.
  
• The SEA region faces top-line challenges, potentially impacting overall group revenue if not addressed.
  
• The company is navigating global uncertainty due to U.S. tariffs, which could disrupt supply chains and consumer demand, affecting both revenue and margins.

Valuation

• The analysts have a consensus price target of €0.3 for Global Fashion Group based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €707.0 million, earnings will come to €18.5 million, and it would be trading on a PE ratio of 4.8x, assuming you use a discount rate of 9.8%.
  
• Given the current share price of €0.26, the analyst price target of €0.3 is 12.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.