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Jabong Posts Doubled Revenues With Three Times More Losses

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Jabong’s newly appointed CEO Sanjeev Mohanty has a lot of catching up to do, to pull out the online fashion retailer from a phase marked by consistent poor financial performance where profitability is nowhere in sight.

That certainly looks like a tough road given the recent financial numbers disclosed by the Rocket Internet-backed company in the latest filing with Registrar of Companies.

According to the filing, Jabong earned sales revenues of ₹1,082.9 crores but also suffered losses worth₹43.6 crores.  The revenues may have doubled in comparison to the last year, but a more significant cause of concern is the three times loss as well.

Last year, it had recorded sales of ₹527 crores with a net loss of ₹16.6 crores, which shows the heavy impact of deep discounting on the profits of the company.

The overall year has not gone too well with Jabong which was once considered a strong contender to Flipkart-backed Myntra in fashion e-commerce. For starters, the internal structure of the company went for a complete overhaul as the CEO and co-founder Arun Chandra Mohan left the company followed by the other co-founder and MD Praveen Sinha.

Before Sanjeev Mohanty took the role of CEO and MD a few days back, the company was being run by an interim CEO Nils Chrestin who is the Chief financial officer at GFG (Global Fashion Group). In addition to the restructuring, there were reports of Rocket Internet planning to sell Jabong due to its continuous string of losses.

After bringing Jabong under its consolidated fashion group GFG, Rocket Internet has been making efforts to increase Jabong’s margins and cut losses, primarily because Jabong’s revenues also have a considerable impact on Rocket’s shares. GFG was collectively valued at Rs 23000 crores in July this year and is reportedly the biggest fashion e-commerce brand in the world.

Though Jabong had shown impressive numbers as far as growth in GMV is considered ( ₹1,320.6 crore for the calendar year ending December 31, 2014), but sooner or later profits do come in the picture. Moreover, Jabong seems to be no longer in the position to raise more funds in order to compete with Myntra, Amazon etc.

These companies are in no better position than Jabong if it comes to unit economics, but they are better backed by the huge fund from investors and can afford to lose money to capture the market. Who knows things could have been better for Jabong if Amazon had not called off its acquisition which reportedly could have been worth over $1.5 billion.

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