Against the backdrop of Europe’s deepening energy crisis, a weak Polish currency, Złoty, and ongoing conflict in neighboring Ukraine, the Polish retail sector has remained surprisingly resilient this year.
Yet heading into the winter, consumer sentiment appears to be low, and the macroeconomic picture remains bleak as Poles continue to struggle with skyrocketing costs after inflation rates hit a new 25-year high of 16.1% in August.
And it’s not just consumers feeling the pinch. Roy Perticucci, CEO of Allegro, the country’s biggest eCommerce platform, told investors Thursday (Sept 29) during a second-quarter (Q2) earnings presentation that the company is addressing the country’s challenging economic environment by cutting costs and pivoting away from riskier high growth strategies.
But overall, Perticucci, who took the helm as the firm’s CEO this month, pointed to the company’s strong Q2 results as a sign of the company’s resilience in the face of extremely challenging macroeconomic conditions.
Read more: Polish eCommerce Platform Allegro Names Ex-Amazon Exec Roy Perticucci as CEO
Citing a growing user base for the loyalty program Allegro Smart! and its buy now, pay later (BNPL) service Allegro Pay, which surpassed 1 million users in Q2 2022, he said, “Allegro brands have become bywords for comfortable and affordable shopping [and] the best solution when it comes to tackling the rising costs of everyday living.”
In fact, the firm’s BNPL solution has consistently grown in popularity since its launch in 2020, with 1.26 billion Złoty ($320 million) worth of loans taken out via Allegro Pay, representing a year-on-year (YoY) increase of 260%.
Related: Allegro’s 2021 eComm Growth Fueled by BNPL, Delivery Network
While the Polish market generates the lion’s share of the Allegro Group’s income, Perticucci highlighted two acquisition deals that the company completed in the previous quarter — Czech retailer Mall Group and WE|DO logistics company — that they are leveraging to expand their European footprint across another six countries on the continent.
Learn more: Poland’s Allegro to Pay $1B for Czech Retailer Mall Group
Already, Polish merchants have started trading on Mall.cz and the first Czech merchants recently debuted on Allegro.pl. The company is set to further integrate its platform across the Central Eastern Europe (CEE) region in 2023.
Profit Predictions Downgraded
Poland’s changing consumer behavior is likely to be affected by a looming energy crisis, with prices at an all-time high after Russia cut off gas supply to the country in April and an EU-wide embargo on Russian coal took effect in August.
As a result, in a country where temperatures can drop well below freezing, politicians have been scrambling to secure alternative fuel sources in time for winter. The Polish government this week also joined 12 other EU states in calling for the European Commission (EC) to propose a cap on the price of imported natural gas ahead of an emergency meeting of EU energy ministers on Friday (Sept 30).
Related: New UK Prime Minister Inherits Worsening Crisis, Skyrocketing Energy Bills
As reported in Politico, in a letter to the EU Energy Commissioner, Kadri Simson, the 12 member state signatories state that “the energy crisis … is now causing untenable inflationary pressures which are hitting our households and our businesses hard.”
Considering the tough macroeconomic conditions facing consumers and businesses, Allegro has updated its 2022 growth projections, adjusting projected profit growth of its Polish-based operations from 10%-15% down to 10%-12%, while Group profits have been adjusted from 4%-11% down to 2%-6%.
The Polish eCommerce marketplace Allegro also announced today that its medium-term expectations for 2023-2026 are currently under review, suggesting that further negative adjustments may be on the cards.
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