Zalando sales soar, non-German markets strongest, but profits are flat
Zalando’s relentless rise is continuing with the pureplay e-tailer saying it continued to outperform the European fashion e-tail market in Q1 as its customers ordered more often and increasingly use smartphones as their key shopping tools.
Despite tough times for physical fashion stores across Europe, the firm showed Tuesday that online is still in growth mode and said revenues grew strongly in the last quarter with a 23.1% surge to €980.2m.
That said, as with many tech-based businesses that are less than a decade old, profits growth was weaker as the firm continued to invest in building market share. Earnings before interest and tax edged up to only €20.3m from €20.2m a year earlier and the margin was 2.1%, down from the prior year’s 2.5%.
But unlike many still-young-and-expanding firm, Zalando is clearly on the profits trail and holds plenty of promise for even bigger earnings over the long term.
“Our key priority is profitable growth, and that is what we delivered on in the first quarter," said co-CEO Rubin Ritter. "We are determined to win further market share and reach more customers across Europe. That is why we will continue investing in the consumer experience, our technology and logistics infrastructure, as well as our brand partner proposition."
And the comapny is even considering opening physical stores, it said earlier this month, following a trend for e-tailers such as Amazon and Missguided to move into the physical sphere as they leverage their reputations as forward-looking retailers to reach omnichannel-focused younger consumers.
Zalando beat its target of 20m active customers at the end of Q1 and the company said the high customer base “ordered more often, reflecting a more loyal shopping behaviour, triggered also by an increasing use of mobile
This meant strong growth in its German-speaking markets (up 17% to €475m) but an even greater surge of 28% to €428.3m in the rest of Europe. That means non-German-speaking markets are well on their way to a level where they will account for the biggest chunk of its business relatively soon.
The strong growth rate was also supported by marketing campaigns such as the Man Box campaign with US actor James Franco. and the addition of further brands such as Oysho.
It was also helped by investment in new fulfilment centres, same-day delivery and instant returns. The company said resulting increases in fulfilment costs and a small decrease in gross margin were mostly offset by more efficient marketing activities, benefitting from a “strong brand awareness and loyal customer base.”
Aside from Germany, Austria and Switzerland, the company operates in Belgium, Denmark, Finland, France, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden, Poland and the UK.
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