Worldview | Mercado Libre Sacrifices Profit for Growth
This week’s round-up of global markets fashion business news also features a luxury goods scandal in Hong Kong, Reliance Retail’s latest acquisition in India and Puma caught in the crossfire in Ukraine.
Latin American e-commerce giant Mercado Libre is prioritizing long-term growth over short-term profits. The Uruguay-based, Argentina-founded company reported a 11 percent decline in net income year on year, totaling $466 million, for the quarter ending June. However, revenue surged 50 percent to reach a record $10.2 billion, its fastest growth in four years.
Higher free-shipping costs in Brazil and investments in expanding its credit-card business have impacted margins. CFO Martin de los Santos explained that the company is making a "deliberate choice to continue prioritising investment in long-term engagement, growth, and scale over near-term profitability." Mercado Libre operates in 18 countries across Latin America and is the region's largest online marketplace, selling a diverse range of products including electronics and fashion brands like Calvin Klein and Hugo Boss.
CEO Ariel Szarfsztejn emphasized that Mercado Libre and its subsidiary Mercado Pago are not separate businesses but rather "one flywheel," with each component enhancing the value of the other.
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