Rocket’s Samwer Wins Respite After Shrinking Startup Losses

(Bloomberg) -- Rocket Internet SE’s embattled Chief Executive Officer Oliver Samwer won a respite from investors after he reduced losses at several of his key startups and reiterated a target to turn at least three of them into profitable businesses by the end of next year.

Adjusted losses before interest, tax, depreciation and amortization narrowed at key startups including clothing retailer Global Fashion Group, food-delivery startup Foodpanda and home-furnishing business Westwing, while sales rose, the company said Thursday. While Rocket overall lost 617 million euros ($692.5 million) in the first half, that was mainly because it wrote down its stake in the value of Global Fashion Group, the company said Sept. 1.

Rocket’s Samwer Wins Respite After Shrinking Startup Losses

Oliver Samwer

Photographer: Krisztian Bocsi/Bloomberg

"We’re very well progressing on our path to profitability,” Chief Financial Officer Peter Kimpel said on a call with reporters. Rocket’s losses stand in contrast to the "stellar" operating development at Global Fashion Group, for example, he said.

Rocket shares jumped as much as 12 percent to its highest intraday level since May 31. It rose 10 percent to 21.11 euros as of 1:01 p.m. in Frankfurt, giving the company a market value of 3.5 billion euros.

Investors are hoping the latest numbers are the start of a turnaround after they’ve criticized Rocket’s reporting for a lack of transparency and questioned Samwer’s ability to wring profitable growth out of startups that operate in commodity sectors in unproven markets. Rocket, which has invested in dozens of companies in areas including food delivery, furniture and fashion, has seen its stock price cut in half since it went public in October 2014 as some of its investments faltered.

Samwer, known as a canny entrepreneur who’s mastered the art of raising money from investors, promised a year ago that Rocket’s losses would narrow after 2015. He also pledged to make three of his startups profitable by the end of 2017 and has since vowed to further raise transparency to make his businesses easier to understand.

Global Fashion Group, which combines apparel e-commerce sites in markets including Asia, South America and Australia modeled after European incumbent Zalando, shrank its adjusted loss to 21 million euros from 63 million euros a year earlier. Its Namshi and Lamoda sites in the Middle East and Russia reported adjusted earnings of 2.3 million euros and 2.4 million euros, respectively.

Not every startup managed to move closer to profitability. Sales at African e-commerce business Jumia slumped 72 percent as it shifted its business model.

The loss at food-box delivery service HelloFresh, which last year shelved plans for an initial public offering, widened to 18.4 million euros in the second quarter from 13.7 million euros a year earlier. Sales more than doubled to 150.1 million euros.

HelloFresh’s losses are a reflection of its expansion into new markets in the past year, most notably the U.S., Kimpel said. The business model “has been validated,” even though it’s newer than the restaurant-meal delivery service offered by Delivery Hero and GrubHub Inc., Kimpel said. “Otherwise we wouldn’t be expanding.”

Rocket didn’t release detailed numbers for one of its biggest investments, food-delivery startup Delivery Hero, even though it did so last year. Rocket will give a slightly more detailed update on Delivery Hero this year, Kimpel said on a call with analysts, declining to elaborate why it didn’t release numbers this quarter. Delivery Hero’s CEO Niklas Oestberg said yesterday his company is profitable, except for the Foodora delivery business it purchased from Rocket a year ago.