About You wants to stick to its long-term goals.
(Photo: AboutYou)
Dusseldorf High inflation and the resulting restraint on the part of consumers are threatening the ambitious growth plans of the About You fashion platform. After the market closed late Tuesday evening, the fashion retailer issued a profit warning. After that, the board of directors of the company listed in the S-Dax only expects growth of 10 to 20 percent in the future. When the forecast was made in May, growth targets of 25 to 35 percent were still on the agenda.
According to About You, adjusted earnings before interest, taxes, depreciation and amortization are expected to be between minus 140 and minus 120 million euros. The plan was minus 70 to minus 50 million euros.
The fashion platform wants to “further intensify the focus on cost control and increase operational efficiency without neglecting important growth investments,” explained Hannes Wiese, co-founder and co-CEO of About You.
The online retailer is not alone in this: The major competitor Zalando had already made a change in strategy at the beginning of August. Both are now no longer concentrating so much on growth, but want to become profitable quickly.
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Achieving breakeven in the 2023/2024 financial year “still has top priority for us,” explained About You boss Wiese, and it will continue to be “confirmed as a forecast, despite the current challenges”. However, About You does not expect the macroeconomic environment to recover in the short term.
Consumers are currently particularly cautious: in July, retail sales fell by 5.5 percent. The Main Association of German Retailers (HDE) expects consumer sentiment to improve in spring 2023 at the earliest. Concerns about energy and electricity costs mean that there is less demand for fashion and furniture, according to an analysis by Baader Bank.
The German economy is in danger of falling into a recession. “The entire retail and consumer sector, which already had its first bankruptcies with Hakle and Görtz, is suffering particularly from rising inflation rates, a sharp increase in energy costs and a general decline in consumer confidence – “even below the level of the COVID-19 pandemic onset in the March 2020”.
>> Read here: Hakle and Görtz could be the harbingers of a wave of bankruptcies – consumer goods are particularly affected by reluctance to buy and rising prices
For the second quarter of the 2022/2023 financial year through the end of August, About You now expects slower growth of between 4.9 and 12.5 percent. Adjusted earnings should improve slightly in the second half of the year. To boost investor confidence, About You co-founder and co-CEO Tarek Müller said in an official statement that he had already increased his stake in About You in July.
In less than a month, on October 11th, the half-year report of About You will be published. The About You share is still listed in the S-Dax, but has lost three quarters of its value since the high shortly after the IPO. The shares were down 4.6 percent in early trading on Wednesday.
More: Minimum order value and less growth: Zalando changes strategy