Zalando makes big loss, but GMV rises on key category and beauty strength

By

Sandra Halliday

Published
May 6, 2020

Zalando confirmed its Q1 results late on Wednesday and also said it “expects to grow its business at double-digit rates [this year] in a fashion market that is expected to show significant negative growth”.

The company had issued preliminary results last month and flagged that it expected an adjusted operating loss of between €90 million and €100 million. In the event, the actual figure was towards the more pessimistic end of that range with a loss of €98.6 million. The prior year figure had been a loss of €6.4 million, the wider loss this time largely being due to lower customer demand in March following the lockdown measures, and an exceptional inventory write-down of €40 million. The net loss was €86.4 million, wider than last year's €17.6 million loss.

But the company chose to focus on the positives from the results with its quarterly general merchandise value (GMV) up by 13.9% to €2 billion and revenue up by 10.6% to 1.5 billion. Growth “was especially pronounced” in the Off-price segment, which grew its revenue by 35% year-on-year. 

Many businesses have been seeing lower (or negative) growth during the coronavirus crisis and most expect that situation to continue. But Zalando expects GMV and revenue growth of between 10% and 20% for the year as a whole, resulting in adjusted EBIT of between €100 million and €200 million.

CUSTOMER NUMBERS UP, BEAUTY STRONG

The company said its clear customer focus “led to a positive development of its reach despite challenging circumstances”. This means the number of active customers grew by 17% to almost 32 million and they were ordering more often too. The number of new customers increased significantly throughout April too with 39% more new customers coming to Zalando than in April 2019. 

It added that in the first months of 2020, it saw significant growth in strategically relevant categories like fashion for kids, sports clothes and accessories, as well as beauty products. The beauty category more than tripled year-on-year, “with customers looking to bring the spa to their home with items such as scented candles, and skin and nailcare products”.

It also saw more customers shopping for sustainable fashion. In March, almost 30% of customers bought more sustainable fashion and such product makes up around 10% of Zalando’s GMV.

The company highlighted the internationalisation of its Connected Retail offline-to-online programme too and said that it's adding physical retailers in Spain, Sweden and Poland. And it said its Partner Program continues to grow. Its share of GMV grew 4.4 percentage points year-on-year in Q1. And in the past three weeks, 50 new partners joined the Program, among them Vaude, American Eagle Outfitters, and Next-owned brand Lipsy London. 

Co-CEO Rubin Ritter said: “We are confident that we will grow double-digit and at a clear profit in 2020. This will allow our partners to grow and gain market share in a challenging economic environment by building their business on Zalando. Many of them have significantly increased their activities on our platform in the past weeks, and we will continue to make it easier for them to reach customers across Europe.”