Zalando EBIT drops, but firm is upbeat as it adapts to current conditions

By

Sandra Halliday

Published
Aug 4, 2022

After some disappointment in June as it downgraded guidance, on August 4, Zalando had better news and said it “expects improved profitability and a return to growth in the second half of the year, confirming its outlook for the full year”. Its shares rose around 6% as a result in early morning trading.

Not that everything is perfect. It said second quarter Gross Merchandise Volume (GMV) was flat compared to “an extraordinarily strong second quarter 2021” at €3.8 billion, while revenue of €2.6 billion was down 4% year-on-year (YOY). It saw adjusted EBIT of €77.4 million, resulting in a margin of 3%. Those figures were €184.1 million and 6.7% a year ago.

It confirmed its guidance provided on 23 June for FY22 with GMV expected to grow 3%-7% to €14.8 billion-€15.3 billion. Revenue is expected to grow 0%-3% to €10.4 billion-€10.7 billion with an adjusted EBIT of €180 million-€260 million in the same period.

It said Zalando Plus grew 164% in Q2, exceeding 1.5 million members and the number of active customers grew steadily to over 49 million (+11% YoY). It added that it’s “successfully executing [its] action plan to adapt to current volatile environment”.

Co-CEO Robert Gentz said: “We have demonstrated our agility as a team, showing that we can react quickly to adapt to the current environment while also making the experience of our customers even more inspiring and engaging. We continue to grow our customer base and are fully focused on our strategy and making selective investments across our business to ensure our long-term growth.”

It also said that in Q2, it invested in elevating the customer experience, notably in Beauty, which grew over 30%. It launched its Plus membership program in Switzerland, and expanded to Romania and Hungary, increasing its footprint to 25 markets. Additionally, Zalando Lounge launched in Romania, Slovakia and Lithuania. 

And in June, Zalando acquired a majority stake in Highsnobiety, the fashion and lifestyle media company.

As part of its action plan to adapt to the current volatile market environment, Zalando said it’s “adjusting its offering to meet changing customer demands for the upcoming seasons. To improve order economics, a minimum order value was introduced in 15 additional markets at the beginning of June and is now live in all 25 markets”. 

And in its aim to adjust its cost base, it “reduced its marketing spend and drove efficiency improvements across its European logistics network”. 

“We are focused on efficiency and margin improvement measures that will help us strengthen our profitability in the second half of the year. Our healthy balance sheet allows us to continue to invest into our technology platform and logistics infrastructure to enable our long term growth trajectory,” said CFO Dr Sandra Dembeck.