May 4, 2023
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Zalando makes most of strong off-price channel, big-name collabs in tough Q1

May 4, 2023

Zalando has been facing increasing headwinds in recent periods but on Thursday the fashion e-tail giant was able to report a number of improved figures for the first quarter as it adapted to market conditions, even though it remains loss-making.

Paco Rabanne x Zalando

It said Q1 gross merchandise volume (GMV) grew 2.8% to €3.242 billion, revenue rose 2.3% to €2.255 billion and the company lost a tiny €0.7 million at adjusted EBIT level versus a heftier €52 million loss a year ago.

Meanwhile the off-price segment “successfully captured customer demand with 33% sales growth” at €415.5 million, while its partner share grew to 39% of Fashion Store GMV “showing progress” for its platform strategy.

The number of active customers also grew 4.8% versus last year to 51.2 million.

The figures come “amid a continued challenging economic environment with high inflation,” it said, adding that “against this backdrop, the company’s focus on improving profitability is paying off”.

It said that “better order economics, primarily bigger basket sizes as customer spending remains resilient, led to lower fulfilment costs and a significant improvement in adjusted EBIT. The focus on profitable growth means the company is on track to meet its full-year guidance”.

Co-CEO Robert Gentz talked up the firm’s “flexible… business model, enabling us to perform in a challenging market environment as we saw strong customer demand at our off-price segment and a strong performance of the partner business”.

And curated product drops with brands such as Adidas and Salomon, or teaming up with designer brands to create capsule collections, “led to increased engagement with our customers. These exclusive and limited-edition products keep our customers coming back more regularly”.

That approach has continued with last month’s launch of a 40-piece capsule with Paco Rabanne that’s “part of Zalando’s ambition to create an inspirational shopping experience for the new generation of designer and luxury consumers”.

It also said its Lounge by Zalando online shopping club that offers customers limited-time offers and discounts on premium brands was important during Q1. It “makes up a major component of the off-price segment” and “grew particularly strongly in the first quarter” contributing to that 33% increase in off-price revenues.

The company added that during the period, the proportion of partners contributing to Fashion Store GMV was up 8 percentage points compared with a year ago at the aforementioned 39%, “meaning Zalando has made progress towards its 50% partner business share target”.

“Our focus on profitable growth is working and delivering results,” said CFO Dr Sandra Dembeck. “As overall demand remains muted, we continue our focus on driving sustainable efficiencies in fulfilment and marketing. 

“At the same time, we are continuing to invest selectively through the cycle into new growth opportunities, ready to capture demand when the market rebounds. For example, we have invested in our fashion discovery experience, where we present brands and assortment to customers through storytelling, as well as our Multi-Channel Fulfillment.”

This latter fulfilment feature in an initiative that Zalando piloted in October. The company said it’s “productising its e-commerce infrastructure in order to enable other businesses across Europe, extending its logistics solutions for brands selling via other platforms as well as through their own online shops”.

As for the rest of this year, GMV is expected to grow between 1% and 7% while revenue is expected to be in the range of -1% to 4% compared with last year. The fairly wide ranges in both cases clearly reflects the ongoing uncertainty out there. It expects adjusted EBIT to be between €280 million and €350 million this year.

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