About You wants to stick to its long-term goals.
(Photo: AboutYou)
On August 4th, Europe’s largest fashion platform, Zalando, announced its strategy shift towards greater profitability. Almost six weeks later, the smaller but faster-growing competitor About You has also committed to new cost awareness.
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 ten to 20 percent in the future. When the last 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.
Hannes Wiese, About You’s co-founder and co-CEO, said they will “continue to intensify the focus on cost control and increase operational efficiencies without neglecting important growth investments”. Achieving break-even in the 2023/2024 financial year “still has top priority for us,” Wiese continued, and it will continue to be “confirmed as a forecast, despite the current challenges”. About You does not expect a short-term recovery in the macroeconomic environment.
In fact, the strategy swing comes as no surprise. Consumer confidence is currently dwindling very quickly. In July, retail sales fell 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.
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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 expects slower growth of between 4.9 and 12.5 percent. For the second half of the year, the company expects a slight improvement in adjusted earnings. Management’s concerns are reflected in the company’s statement: “The Management Board takes the currently challenging market environment very seriously and is intensifying the existing cost control measures without forgoing important investments in future growth.”
Finally, Tarek Müller, co-founder and co-CEO of About You, can be quoted as saying that he is so convinced of the business model that he increased his stake in About You back 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. At the close of trading, ie before the profit warning was announced, the share was listed at EUR 6.41.
More: Minimum order value and less growth: Zalando changes strategy