Zalando is growing for the first time this year – and is sticking to its outlook

Zalando outlet on Königsallee in Dusseldorf

A renewed influx of customers and the introduction of a minimum order value give Zalando a jump in profits.

(Photo: imago images/Michael Gstettenbauer)

Berlin, Dusseldorf Zalando is growing again: In the third quarter, revenues increased by almost three percent to 2.35 billion euros. The company announced on Thursday morning. It is the first time this year that Berliners have not recorded a decline.

“We have delivered growth,” said company co-boss Robert Gentz. In addition, Zalando cracked the number of 50 million customers. Gentz ​​spoke of a milestone for the company, which was founded in 2008. This means that Zalando remains the largest online fashion portal in Europe.

However, the Berliners cannot detach themselves from the economic challenges. “The headwind for growth is getting stronger,” said Gentz. Inflation is at its highest and consumer spending is at its lowest.

Gentz: Target of 30 billion euros gross goods value more difficult to achieve

That is why Zalando is cautious with forecasts for 2023 and is also questioning its medium-term goals, which are being closely monitored by the capital market. Zalando plans to increase gross merchandise value to more than EUR 30 billion per year, Gentz ​​said.

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At the moment, however, it is less likely to achieve this goal as early as 2025. For 2022, Zalando expects a gross goods value of around 15 billion euros and thus only around half of the target volume.

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“In this challenging market environment, we will continue to act prudently and drive forward measures to improve profitability,” said the co-boss. In order to save costs, Zalando has reduced its marketing expenses and introduced a minimum order value in all 25 country markets.

The company still does not want to charge fees for returns. The number of employees again fell slightly to less than 17,000. Sustainability chief Kate Heiny recently left the Dax group.

Zalando sticks to the overall forecast

The adjusted operating result (EBIT) rose by almost 38 percent to 13.5 million euros from July to September due to the latest measures. The bottom line, however, is that Zalando increased its loss due to special effects from 8.4 to 35.4 million euros.

Zalando’s biggest competitor, the British company Asos, is struggling with similar problems. Asos even had to cope with a 105 percent drop in earnings at the end of August in the past financial year and ended up in the red. The British are now putting their business model to the test.

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Zalando, on the other hand, is sticking to the outlook for the full year, which was lowered in the summer. Accordingly, the company continues to expect growth of between zero and three percent for 2022 and an adjusted operating result of between 180 and 260 million euros – but only at the lower end of the range.

CFO Sandra Dembeck said: “The consumer climate has reached a new low and inflation is still high.” At the same time, she dampened expectations for the final quarter with the Christmas business, which is important for the fashion industry: “It is unclear how consumer spending will develop in the fourth quarter According to Zalando, customers are currently looking primarily for cheap and discounted goods, but also for luxury items of clothing. The value of the average shopping basket fell by two percent to EUR 56.20 in the third quarter. On the other hand, the number of average orders increased slightly. Amazon is also cautious about the Christmas quarter.

Zalando shares have meanwhile risen to more than 24 euros

Analyst Volker Bosse from Baader Bank explained that Zalando had “initiated the right measures” in the current crisis, which was being shaped by external factors such as the Ukraine war, high inflation and reluctance to buy. The analyst included the platform strategy and the cooperation with stationary retailers.

In addition, Zalando is also benefiting from the current challenges because more and more partners are joining the Zalando fulfillment system. The analysts at DZ Bank emphasized that the partner program share in the gross volume of goods has increased by seven percentage points.

Some of the cooperating brick-and-mortar retailers, who do not wish to be named, criticize that the costs and benefits of the platform are not in a good balance for them. Elsewhere, there is satisfaction with an important partner: the clothing chain C&A recently expanded its cooperation with Zalando. When asked whether the fashion department store chain sold more through Zalando, C&A digital boss Joris Van Rooy replied: “We are very satisfied with our partnership with Zalando.” Since the beginning of the cooperation, the business has grown steadily. Zalando now has 7,300 stationary shops connected to the platform, as the company announced.

On Thursday, the shares rose against the market trend by more than four percent to more than 24 euros, but were still almost 67 percent below the level at the beginning of 2022. In December it will be decided whether Zalando will continue to be listed in the Dax. Newcomer Porsche is currently pushing into Germany’s most important stock market index.

More: Zalando in crisis: These are the problems of the Dax company

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