When scale fails: Allegro’s costly lesson in regional expansion

Until now, no Polish e-commerce company had paid as much for an acquisition as Allegro did in 2022 for the Czech Mall Group and WE|DO: EUR 881 million, or over PLN 4 billion at the time. Few domestic firms in the sector can even boast such a valuation - eObuwie was, for a time, valued higher.

The deal was meant to transform Allegro – a local giant, for whom the Polish market was becoming too cramped – into a regional champion. Instead, it triggered years of necessary restructuring, only now drawing to a close. Selling off part of the business proved essential.

A rational cut to multi-million losses

On January 7, Allegro signed an agreement with the German fund Mutares to sell 100 percent of its shares in two companies acquired as part of the Mall Group: Slovenia’s Mimovrste and Croatia’s Internet Mall. Allegro did not disclose the value of the transaction, which is expected to close within this half-year. For a company of its size, the deal was not considered material.

The company only noted a “one-off negative impact on net income” from the transaction, estimated at around PLN 235 million (EUR 50 million). Of that, PLN 105 million (EUR 22 million) was already recorded as a non-cash impairment in its fourth-quarter 2025 results.

The impact on future results, however, is expected to be positive due to the losses incurred so far. The “Mall South” segment posted a PLN 23.8 million (EUR 5.1 million) adjusted EBITDA loss over the first nine months of 2025, compared with PLN 26.2 million (EUR 5.6 million) the year before.

“We approached this rationally. Croatia and Slovenia are the last markets still operating on Mall’s old infrastructure, which is simply too costly for this scale of operations,” commented Marcin Gruszka, Allegro’s spokesperson.

Investors responded positively. On January 7, the Warsaw Stock Exchange (GPW)-listed company’s share price rose nearly 5 percent to just under PLN 33 (EUR 7.1), implying a market capitalization of PLN 35 billion (EUR 7.5 billion).

The other side of international expansion

The entire Mall business has been shrinking year by year, weighing on the group’s results. This is a consequence of the shift from a 1P model (direct sales) to 3P (a platform hosting external sellers).

“We want to focus on the potential of the new countries where we have opened our sales outlets – namely, Czechia, Slovakia, and Hungary. These are markets with 25 million potential customers compared with a total of 7 million in Croatia and Slovenia. We chose an option that will ensure these businesses receive proper attention from a new investor, while we can concentrate on further developing our 3P model,” says Marcin Gruszka.

In 2023, the Mall segment posted a PLN 204.6 million (EUR 44 million) adjusted EBITDA loss. The number of active buyers fell by 4 percent year on year to 4 million, while their average spending dropped 19 percent to PLN 755 (EUR 163), driving revenue down by nearly a quarter to PLN 2.3 billion (EUR 500 million). The following year, both the number of buyers and their spending fell by more than 20 percent, revenues declined 37 percent, and the adjusted EBITDA loss reached PLN 217 million (EUR 47 million).

The negative trend continued in 2025, but Allegro’s platforms launched in Czechia, Slovakia, and Hungary began to gain importance. In the third quarter of 2025 alone, 4.2 million people (twice as many as the year before) purchased 9.8 million products (+69.8% y/y) worth PLN 599.3 million (EUR 129 million, +55.9% y/y).

“This sales performance marks the end of Mall’s asset restructuring. In the ‘Mall North’ segment, we have already implemented the target model that we are now focusing on. All 1P operations in Mall have been integrated with our 1P operations in Poland and are used to complement the selection, especially during peak sales periods,” explains Marcin Gruszka.

Divesting the Slovenian and Croatian businesses is intended to help the company achieve one of its key objectives: generating profits from its international operations this year.

Fireside chat

Cleaning up after an obvious mistake

XYZ: Does selling the Slovenian and Croatian businesses at a loss further prove that the Mall Group deal was a failure for Allegro?

Łukasz Wachełko, analyst at Wood & Company: By any measure, in my opinion, the Mall acquisition was not a business success. And I believe Allegro is aware of that. The Czech market, the most important piece of the puzzle, turned out to be the toughest. Czech consumers are different from those Allegro is used to – they are more conservative and change their habits much more slowly. Matters are complicated further by strong competition from the likes of Amazon and Alza.

The Slovenian and Croatian markets, however, are relatively insignificant for Allegro in terms of scale. It’s a bit like Biedronka (Polish for “ladybug”, it is Poland’s dominant discount supermarket chain – ed.) in Slovakia. For that reason, despite news of yet another impairment in the Mall segment, I view this move positively – much like the market, judging by the several-percent rise in the share price. It’s good that Allegro is trying to put things in order and not drag this on indefinitely. The key point is that the company must make money.

Can we assume that Allegro will take a more cautious approach to acquisitions?

I believe Allegro has learned a lesson from the Mall transaction and will be more restrained in any potential future acquisitions. It’s hard to say whether this investment will ever pay off. Allegro must, however, grit its teeth and move forward. To its credit, the Mall acquisition took place under exceptional circumstances – market conditions essentially forced its hand.

Why?

That was the “wisdom of the stage.” I remember many investors signaling that Allegro focused too much on margin and too little on scaling the business. They pointed to MercadoLibre in Brazil as an example: not very profitable at the time, but rapidly growing turnover.

Pressure to grow at Allegro was increasing, and it’s difficult to accelerate growth significantly in a market where you hold around 40 percent share. That may have pushed the company toward international expansion through acquisitions. I recall that when Allegro acquired Mall, much of the market initially welcomed the move. Only over time did it become clear that the quality of the “product” purchased did not meet expectations.

In hindsight, this transaction was clearly a mistake. But it’s always easier to make that assessment after the fact.

Łukasz Wachełko

Analyst, Wood & Company

A turnaround fund with a plan

The transaction was welcomed not only by the seller’s shareholders, but also by those of the buyer. Mutares, which is listed on the Frankfurt Stock Exchange, saw its market capitalization rise by several percent to nearly EUR 680 million (around PLN 2.8 billion at current exchange rates). Its portfolio includes 33 companies – including the Polish drugstore chain Natura – which in 2024 generated EUR 5.3 billion in revenue and employed 34,500 people.

The fund’s objective is to achieve a seven- to as much as tenfold return on invested capital. To that end, it targets mid-sized companies in need of restructuring.

Mimovrste and Internet Mall fit that profile. Together, they employ more than 250 people and generate roughly EUR 100 million in revenue. The vast majority comes from e-commerce, with the remainder generated by three brick-and-mortar stores in Slovenia and one in Croatia.

“The Slovenian and Croatian markets are not particularly attractive for Allegro, given their size and geographic distance from the company’s core operations. The acquired business requires highly specific actions and a strong focus on local needs, which from the perspective of a large organization like Allegro simply becomes unprofitable. The seller is carving out a slice of the pie that it was unable to fully integrate into its organization,” says Dominik Rożko, head of Mutares’ Polish office.

Optimization, IT overhaul, and offer expansion

Slovenia’s Mimovrste and Croatia’s Mall.hr recorded roughly 8 percent lower revenues and operating costs over the first three quarters of 2024, at PLN 291 million (EUR 63 million) and PLN 315 million (EUR 68 million), respectively. The vast majority of costs – PLN 238 million (EUR 52 million) – stemmed from the cost of goods sold. The second-largest cost item was payroll, which fell from PLN 31.5 million (EUR 6.8 million) to PLN 27.4 million (EUR 6 million). All cost categories posted negative dynamics except for IT spending, which rose sharply from PLN 2.1 million (EUR 0.5 million) to PLN 17.9 million (EUR 3.9 million).

“We are acquiring commercially healthy assets – Mimovrste is the clear e-commerce leader in Slovenia, while Mall ranks among the top five players in Croatia. We intend to strengthen their positions. The losses do not stem directly from the business model itself or from structurally inefficient costs. Naturally, we see room to optimize many processes, but in the first phase we will place the greatest emphasis on aligning the IT ecosystem with both the business model and the scale of operations,” says Dominik Rożko.

As of the end of September 2024, the number of buyers at both companies was 14 percent lower year on year, at around 600,000. Average spending per customer, however, rose by 7 percent to more than PLN 1,000 (EUR 215). Shoppers have access to roughly 2 million listings across more than 20 categories, including consumer electronics and large household appliances.

“For Mimovrste’s and Internet Mall’s existing partners, nothing will change in terms of commercial cooperation. What’s more, we will seek to deepen that cooperation across multiple dimensions. We intend to remain focused on our historically core categories while entering new segments with new partners,” Dominik Rożko adds.

Fireside chat

A sign of financial discipline and strategic maturity

XYZ: Is Allegro’s exit from Croatia and Slovenia a natural move?

Marcin Czyczerski, co-founder and partner at GCG Partners, and a supervisory board member at CCC, Esotiq, Wittchen, Rainbow Tours, and PKL:
The acquisition of the Mall Group was one of the largest e-commerce transactions in the CEE region. Allegro’s ambition was to quickly leverage scale effects and expand decisively beyond Poland. In practice, however, integration proved far more difficult than anticipated.

Why?

The key challenge was the mismatch between business models. Mall operated primarily as a 1P retailer – with its own warehouses and a capital-intensive operating structure – while Allegro is a 3P marketplace platform. Integrating these two worlds required not only technology, but a fundamental shift in operating logic and business culture. As a result, Allegro focused on the most promising markets: Czechia and Slovakia. It rolled out the marketplace model, shut down the Mall.cz and Mall.sk platforms, and transformed the former 1P business into a seller on its own platform.

At what cost?

The costs and time required for integration were underestimated. Since the decision to acquire Mall in 2021, Allegro has incurred more than PLN 1 billion (EUR 215 million) in cumulative EBITDA losses from this business – on top of the high acquisition price of PLN 4.1 billion (EUR 880 million) and nearly PLN 0.4 billion (EUR 85 million) in capital expenditures. After a relatively better year in 2023, it became clear that continuing to maintain unprofitable segments was delaying the achievement of international profitability and weighing on the group’s overall results.

The Mall South segment – Slovenia and Croatia – remained largely outside the core integration stream, relying on the Mall Group’s legacy IT infrastructure. The scale of the business and local market specifics would have required further, disproportionately high investment, with limited return potential. Moreover, these are markets with structurally lower scalability – both in terms of purchasing power and demand concentration – than Czechia or Poland.

At the same time, the southern part of the CEE region is becoming increasingly competitive. Regional champions are expanding aggressively: Turkey’s Trendyol, with its fashion-focused offering and heavy investment in cross-border expansion and marketing, and Romania’s eMAG (together with Fashion Days), which is building an integrated marketplace and logistics ecosystem. In such an environment, further capital-intensive investments by Allegro in these markets would offer an increasingly unattractive risk-return profile.

So selling at a loss Is the “lesser evil.”

In this context, selling Mall South to an investor specializing in restructurings is a rational move. Allegro is simplifying its international structure and focusing on markets where the marketplace model works, scales, and improves profitability. An asset-light model – based on commissions and network effects – is clearly far less capital-intensive than a 1P retail model built on owned inventory and logistics.

Such decisions fit into a broader trend in retail. Pepco has recently made a conscious exit from markets with weaker economics and intense competition, including Germany and Austria, and has suspended expansion in Spain and Portugal. It has instead concentrated on regions where its cost structure and scale provide a competitive edge. Similarly, the CCC Group earlier streamlined the international footprint of its flagship brand by exiting the DACH region (German-speaking countries).

So how would you sum up the sale of the Croatian and Slovenian businesses?

Allegro, too, stands to benefit from putting its geographic footprint in order and sharpening its focus on markets with genuine potential for further scaling and innovation – innovation that is once again gaining momentum within the company. Despite the short-term accounting cost, this move should be viewed as a sign of financial discipline and strategic maturity on the part of management. Allegro is showing that it can correct course, withdraw from initiatives that fail to deliver the expected results, and reallocate resources to areas with the highest potential.

To me, this is also a signal of management quality: a lack of attachment to “imperial” ambitions of geographic expansion in defiance of facts and at the expense of performance. This is not a failure of expansion, but a sensible course correction. Unfortunately, valuable experience comes at a price. The integration of Mall proved more difficult than expected. Allegro has drawn conclusions and is demonstrating that flexibility, focus, and selectivity are essential to scaling a commerce platform in Europe.

Marcin Czyczerski

co-founder and partner at GCG Partners, and a supervisory board member at CCC, Esotiq, Wittchen, Rainbow Tours, and PKL

Key Takeaways

1. A necessity. Allegro will sell its Slovenian and Croatian businesses, operated by Mimovrste and Internet Mall, to the Mutares fund. The two companies generate around EUR 100 million (approximately PLN 465 million) in annual revenue, while their EBITDA losses have amounted to tens of millions of zlotys each year. Allegro has estimated the “negative impact of the transaction on net income” at roughly PLN 235 million (EUR 50 million). Even so, it expects a positive impact on future results, as it will no longer need to subsidize an unprofitable business. The company describes the move as rational.
2. The effects. Allegro acquired the businesses in these countries in 2022 as part of its purchase of the Czech-based Mall Group for around PLN 4.1 billion (EUR 880 million). It now intends to focus on Czechia, Slovakia, and Hungary. Crucially, however, it is shifting away from the direct-sales model pursued by Mall toward a marketplace model – that is, operating a platform for external sellers. The multi-year integration and restructuring process generated more than PLN 200 million (EUR 43 million) in adjusted EBITDA losses annually. From 2026, the company expects its international operations to finally turn profitable.
3. The strategy. “We are acquiring commercially healthy assets. Mimovrste is the clear e-commerce leader in Slovenia, while Mall ranks among the top five players in Croatia,” emphasizes Dominik Rożko, head of Mutares’ Polish office. He stresses that the companies’ losses do not stem directly from the business model itself or from structurally inefficient costs. Once the transaction is finalized, the new owner will focus on optimizing processes, streamlining the IT infrastructure, and expanding the product offering and cooperation with existing partners.