Berlin, Dusseldorf Zalando achieved an operating profit (EBIT) of EUR 77.4 million in the second quarter. This means that Europe’s largest online fashion retail platform has slowed down somewhat after a loss in the first quarter. However, sales fell again, by four percent to 2.6 billion euros.
“As a team, we have demonstrated our agility and our ability to react quickly and adapt to the current environment,” said Robert Gentz, co-CEO of Zalando. The company also confirmed its forecast. It expects sales this year to rise by between zero and three percent to between 10.4 and 10.7 billion euros, with adjusted EBIT expected to be between 180 and 260 million euros.
For Zalando’s growth strategy, however, it is primarily relevant whether the gross goods volume increases. This is the sum of all sales on the platform, including sales made by brand manufacturers or other retailers. This value, also referred to as external sales, only grew by one percent to 3.2 billion euros in the first quarter compared to the same quarter of the previous year.
In the second quarter, the company’s gross merchandise volume was EUR 3.8 billion. This means that it has practically not increased compared to the same quarter of the previous year.
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The company has drawn up an action plan to prepare for the difficult situation. Part of this is the introduction of a minimum order value that now applies in all 25 Zalando stores. In addition, Zalando has reduced its marketing expenses and investments in logistics infrastructure.
Competitor AboutYou has recently grown faster
Zalando is evolving more and more from a fashion retailer to a fashion platform. There are now more than 7,000 retailers in 13 of the countries in which Zalando is active. The share of sales has grown from 24 percent in 2020 to 30 percent by the end of 2021 and has recently caused the gross goods volume to rise to 14.3 billion euros.
During the pandemic, Zalando even turned from a competitor to brick-and-mortar retail to its savior because they were able to use the platform free of charge at times. By 2025, the company says it wants to achieve around 50 percent of the gross merchandise volume through partners in the Zalando shop.
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But now fashion retailers have to pay fees again if they sell via the Zalando platform. At the same time, unlike in the lockdown, they can sell stationary again and most of them now have their own online shops. In an interview with the Handelsblatt, co-CEO Gentz admitted that sales in this area, which Zalando calls Connected Retail, have fallen. If the stationary retailers are to stay with Zalando, the company would have to approach them, says a fashion expert who does not want to be named.
Despite all the current weaknesses, the lead that Zalando has over European and German competitors will be difficult to catch up for years to come. It is noticeable that the most important German online competitor, the fashion retailer AboutYou, is on a much better path. He was able to increase his sales in the first quarter, which begins on March 1, by 19.4 percent to 54 million euros.
Changing consumer behavior is also jeopardizing Zalando’s growth strategy. Fashion is not a must-have, but a warm home is. If a family of four might have to spend around 1000 euros more on energy, then there is no money for other expenses. Mobility is also becoming more expensive.
Zalando is threatened with relegation from the Dax stock market index
Eva Stüber, member of the management board of the IFH Cologne, answers the open question of whether online fashion retail will suffer more from reluctance to buy than brick-and-mortar retail: “Target purchases in brick-and-mortar retail now also account for the largest proportion of fashion” – strolling is a rare reason for a purchase. At the same time, the need for convenience continues to dominate, fueling online trade. The e-commerce expert comes to the conclusion: “There are no signs that online trade will suffer more than stationary trade.”
Doubts about Zalando were already growing among investors well before the drop in sales. The price has been falling since the middle of last year. While it peaked at around 100 euros, it has now leveled off at under 30 euros.
This is one of the reasons why Zalando is threatened with relegation from the Dax, in which the company was only promoted last year. When the leading index was readjusted in June, Zalando was in 42nd place. The risk of falling back into the MDax has therefore increased.
However, the June ranking has no relevance for the future composition of the index. Things won’t get serious again until September, when Deutsche Börse next looks at the data.
More: Zalando has gone from hunter to hunted