Amid Softening Demand in Q3, Zalando Puts Focus on Profitability – WWD

Zalando confirmed its guidance for 2022, but cautioned that revenues and profits would be subdued amid “declining consumer sentiment.”

Revenues in the third quarter improved 2.9 percent to 2.35 billion euros, while gross merchandise volume, or GMV, rose 7.1 percent to 3.28 billion euros. Adjusted EBIT grew 38 percent to 13.5 million euros.

RBC analyst Sherri Malek noted the numbers came in a “touch above” expectations.

The German company vowed that it would remain “laser-focused on protecting profitability” as headwinds mount.

“The introduction of a minimum order value has encouraged customers to increase the size of their basket or pay the delivery fee. As a result, orders below the minimum order value are now profitable,” the company said in a release.

It noted that it “captured further marketing efficiencies in the third quarter,” allowing it to trim costs by almost 100 million euros so far this year. “The company also drove efficiency improvements across its European logistics network including managing excess inventory,” it added.

“With consumer confidence at new lows and ongoing inflation, it was a prudent decision to start early with decisive action and measures to support profitability,” commented Sandra Dembeck, Zalando’s chief financial officer. “Although it’s not crystal clear how consumer spending will play out in the final quarter, we are working hard to execute and deliver on our strategic priorities and financial outlook.”

Zalando still expects GMV to grow 3 to 7 percent to 14.8 billion to 15.3 billion euros, and revenues to come in somewhere between flat and 3 percent growth to 10.4 billion to 10.7 billion euros, but at “the lower end of these ranges.”

RBC noted that its estimates beyond next year are below consensus “as we expect a lower growth environment amidst inflation and as profitability is prioritized.”

Zalando’s co-chief executive officer Robert Gentz noted that its number of active customers increased by 8 percent in the third quarter, exceeding 50 million for the first time, while membership in its loyalty program tripled.

“We will continue to carefully navigate through these turbulent times, pushing forward with measures to improve profitability as well as strategic initiatives that inspire and engage with our customers,” he added.

Read More: Amid Softening Demand in Q3, Zalando Puts Focus on Profitability – WWD

2022-11-03 00:13:10

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