Global Fashion Group (GFG), parent company to The Iconic has increased discounting across its brands in Australia and New Zealand at the end of last year, which has reportedly driven down its gross margins.
For Black Friday/Cyber Monday sales last year, The Iconic launched its discount sales a week early.
Speaking at a presentation on its Q3 2022 trading update in November last year, GFG Christoph Barchewitz said demand was softer than anticipated in both Latin America (LATAM) and AU NZ, resulting in the discount measures.
“We have adapted to these market conditions and have taken action on cost and inventory to maintain our adjusted EBITDA margin, which improved 0.1 percentage points over the prior year,” Barchewitz said.
In its trading update, the company said its outlook was impacted by macroeconomic conditions that have dampened consumer spend and elevated levels of uncertainty over the Group’s peak trading period.
In ANZ, consumer demand trended downwards through the quarter and the company said it expected this alongside elevated levels of promotional activity to continue into Q4.
“To reflect the change in demand environment, the Group is actively managing its cost base and maintains its focus on finishing the year strongly and efficiently,” the group said.
GFG said its ANZ market grew strongly in Q3 with 25% net merchandise value (NMV) growth and an active customer growth of 13%. This was reportedly driven by customers choosing to buy higher priced fashion items more frequently.
Barchewitz said consumers have been shifting into fashion categories and choosing higher-priced products in Q3. He said that, for ANZ in particular, the average order value has increased.
“Marketplace share of NMV declined to about 32%, which was driven by LATAM, where our focus on customer service meant we deemphasized some Marketplace sellers, and ANZ where we saw more customers choosing to shop our retail promotions.”
GFG CEO Matthew Price added that 2022 had faced a deceleration in consumer spending driven by weakening consumer sentiment and rising inflation across its global markets.
For Australia in particular, consumer confidence continues to remain below the 2022 yearly average.
“We had anticipated a more challenging macro environment going into H2, and we've seen that come through,” Price said. “In ANZ, demand softened through Q3, which we expect to continue through Q4.
“These trends are similar to what some of you might be more familiar with in Europe, but their fundamentals are stronger in ANZ.
“So we're expecting consumer discretionary spend to be more resilient there.”
Barchewitz added that the company is experienced at adapting to macro issues and volatility.
“We have increased our focus on improving efficiency and managing our costs, while strengthening our platform proposition and assortment to continue inspiring our customers,” Barchewitz said. “With over 800 million consumers projected to spend around €230 billion (AUD$358.8) on fashion and lifestyle products in GFG’s markets this year, we remain confident in the significant opportunity ahead.”