Zalando Seeks to Wring Profits in Slow-growth ‘Transition Year’
PARIS — Zalando said Thursday it expects discretionary spending to remain under pressure in 2023 as it focuses on improving profitability amid modest top-line growth.
Revenues at the German e-commerce platform gained 2.3 percent in the three months ended March 31, and the second quarter has had “a bit of a slower start,” chief financial officer Sandra Dembeck told a conference call.
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“We do not foresee any significant changes in the macro situation over the coming months,” she cautioned, citing slowing GDP figures and inflation among the economic headwinds.
The indications sent the stock down as much as 6.3 percent in trading on Thursday.
Bargain-hunters helped offset subdued demand for full-price merchandise at the top of 2023, with revenues in its off-price segment vaulting 32.9 percent.
Lounge by Zalando, an online shopping club that offers customers limited-time offers and discounts on premium brands, makes up a major component of the segment.
Dembeck noted this is also helping Zalando clear excess inventory, a problem plaguing other German companies, including Puma.
Zalando also trumpeted that it reached breakeven at the EBIT level amid belt-tightening, although its net loss amounted to 38.5 million euros.
Zalando’s gross merchandise volume, or GMV, increased 2.8 percent to 3.24 billion euros.
The company confirmed its 2023 guidance and is expecting GMV to grow between 1 percent and 7 percent, and revenues to develop in the range of minus 1 percent to plus 4 percent compared with last year.
“The strong delivery on cost efficiencies, particularly on the fulfillment side, gives us confidence in management’s ability to deliver on FY profit guidance, despite the risk to gross margin development,” RBC analysts said after the numbers were released, noting that they came in slightly ahead of consensus.
Overlooking the conservative view on top-line growth, the bank argued Zalando is “best positioned to capture demand once it returns, which will be on a more efficient cost structure too.”
Zalando registered a decrease of 0.1 percent in annual sales in 2022 as customers returned to physical stores in the post-pandemic period, deflating what had been euphoric growth for online players.
Dembeck noted that exclusive and limited-edition products are helping the online player engage consumers, with first quarter offering curated drops from Adidas and Salomon, plus a 40-piece spring capsule by Paco Rabanne.
Zalando grew by 4.8 percent the number of active customers versus the first three months of 2022.
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