Zalando Reports Flat Q2, Lowers Guidance – WWD

Zalando, one of Europe’s largest online fashion retailers, reported revenues fell 4 percent to 2.62 billion euros in the second quarter.

In a statement, the company said it expected to return to growth in the second half of the year. It also noted that consumer confidence indicators in the EU had fallen 24 points by the end of June, “the lowest level seen since April 2020.”

The dip can also be explained by the fact that Zalando saw unusually high growth during the same period in 2021, due to pandemic-related lockdowns.

However, as restrictions have eased in Europe since last winter and consumers have turned back to physical stores, Zalando has not been able to maintain the same sort of momentum.

Due to the flat results between April and June, the company’s half-yearly revenue also fell slightly, dipping 2.9 percent to a total of 4.83 billion euros.

The company said it was focusing on counter measures to return to growth, including deepening customer relationships with its loyalty program, extending beauty sales and trimming costs by instituting a minimum value for orders in several countries.

“We have demonstrated our agility as a team, showing that we can react quickly to adapt to the current environment,” Zalando co-chief executive officer, Robert Gentz, said in a statement announcing the results. “We are fully focused on our strategy and making selective investments across our business to ensure our long-term growth.”

Zalando’s Gross Merchandise Value, or GMV, also remained flat, sitting at 3.2 billion euros for the quarter. As Zalando has expanded its platform model, moving into logistics and marketing for other retailers and brands, GMV has become one of the German giant’s key indicators of success — it measures how much inventory the platform has moved and is usually higher than the company’s revenues.

Other key indicators for the fashion platform are the number of active customers and orders. Both of these figures grew slightly over the second quarter. Zalando’s active customers increased by 10.6 percent and numbered 49.3 million. The company processed 67.8 million orders, a rise of 3.2 percent.

Additionally, the number of orders per active customer went up over the second quarter, even though the value of what they were buying, or basket size, slipped from 57.70 euros per purchase to 55.90 euros.

While all of this is far from the double-digit increases the company was enjoying during the pandemic, it has still seen slower but steady improvement in almost all of its key indicators over the past few quarters, as retailing has gone back to normal.

Over the second quarter of this year, Zalando’s EBIT fell from 186.4 million euros to 61 million euros. EBIT for the first six months of 2022 was 7.1 million euros in the order.

On the back of the Q2 results, Zalando reconfirmed its lowered guidance for the year. Zalando had already released preliminary results for the quarter and downgraded its forecast in late June because, as it wrote then, “the company no longer assumes a rebound of consumer confidence in the short-term.”

Market analysts said that although Zalando’s results were at the lower end of expectations, they were reassured by this week’s confirmation of the June release. However, as analysts at the Royal Bank of Canada also pointed out, “the subdued growth outlook near term makes Zalando’s mid-term targets more challenging to achieve.”

Zalando’s ultimate ambition is to serve 10 percent of the total European fashion market and move 30 billion euros worth of products annually by 2025.

For 2022, Zalando now expects GMV to grow between 3 and 7 percent to up to 15.3 billion euros. Revenue should increase up to 3 percent and bring in between 10.4 billion and 10.7 billion euros by the end of the year and adjusted EBIT is expected to come in somewhere between 180 million and 260 million euros.

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