Zalando happy as site visits soar, despite dip in net income
today Aug 1, 2019
Zalando’s net income may have been lower in Q2 than it was a year earlier, but with the company investing heavily in sales growth, that wasn’t the metric it was focusing on. Instead, in its results report on Thursday, it talked up its customer growth and surging gross merchandise value (GMV) and raised its full-year profit outlook.
The German e-tail giant said it had “successfully grown its business” during the quarter with the number of active customers up “significantly”. That certainly wasn’t hyperbole as the number actually grew by 3.7 million, or 15.2%, year-on-year to 28.3 million across its 17 European markets.
And in the same period, site visits soared 34.3% to 986.4 million. Interestingly too, 83.5% of site visits came through mobile devices, resulting in a record number of orders (36.1 million).
It all hints strongly at the massive potential the company has, but where exactly is it at the moment? Well, it’s profitable, with net income of €45.5 million, although that was down on the €51.8 million at this time last year. That was achieved as GMV grew by 23.7% to €2 billion, revenues rose 20.1% to €1.6 billion. And its adjusted EBIT reached €101.7 million (up from €94 million) for a margin of 6.4%, although that was down from 7.1% in the prior-year period.
The overall growth came as the firm continued to broaden its assortment by investing in sustainable fashion and premium product, by extending its Partner Program and by expanding its link-ups with offline retailers. To date, more than 1,300 offline stores are connected to its platform.
CFO David Schröder said: “More customers than ever before have chosen Zalando as their starting point for fashion. This proves that our continuous efforts to deliver a best-in-class fashion experience pay off.”
And the company continues to invest in order to drive its growth further with the build of the new warehouse in the Netherlands starting this summer as it focuses more heavily on Western Europe, something rivals such as Asos will be watching closely. It has also speeded up its same- or next-day delivery option in its core German market.
“Our platform transition continues to accelerate,” Schröder added. “The growth of our Partner Program leads to a more attractive and diverse assortment for our customers. We will continue to see GMV growing faster than revenues, fully in line with our long-term strategy.”
And that profits upgrade? Following a strong first half, its guidance range stays the same at between €175 million and €225 million, but it now expects profits to be in the “upper half” of that. And revenue growth should be between 20% and 25% but will be “around” the low end of this range, rather than “at the low end”.
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