Zalando’s Profit Falls as In-Store Sales Rebound

Zalando boxes. Shutterstock.

German online fashion retailer Zalando reported a slump in quarterly profit on Wednesday as it offered discounts to try to keep customers shopping online after physical stores reopened following the easing of coronavirus lockdowns.

It said there was a “fierce promotional environment” in many European markets, adding that unusually warm weather in September had kept a lid on demand for full-price fall/winter items and increased sales of discounted spring/summer fashion.

Zalando shares were down 2.7 percent at 0840 GMT.

However, as temperatures dropped in October, Europe’s biggest fashion e-commerce player saw demand recover for seasonal wear. “We are off to a very good start to Q4,” finance chief David Schroeder told journalists.

With many fashion brands hit by the closure of Asian factories due to coronavirus lockdowns, Schroeder said Zalando was well stocked for the next few months but it could see delays to deliveries of spring/summer items, particularly sneakers.

British rival ASOS warned last month that supply chain pressures and consumers returning to pre-pandemic behaviour could reduce 2022 profit by over 40 percent.

Zalando said its third-quarter adjusted operating profit fell to €9.8 million ($11.35 million) from €118 million a year ago, while sales rose 23 percent to €2.3 billion, slightly ahead of analysts’ average estimate of €2.24 billion.

British clothing retailer Next beat forecasts on Wednesday with a 17 percent rise in third-quarter full-price sales compared with 2019.

Zalando said its operating profit was in line with the number it posted in the third quarter of 2019, before the pandemic helped the company post exceptional results.

Zalando spent more on marketing on the period, also due to its recent launch in six new markets in eastern Europe.

Zalando reiterated it expects full-year sales to grow 26 percent to 31 percent to €10.1 billion to €10.5 billion and forecast adjusted earnings before interest and taxation to reach the upper half of its guided €400 million-€475 million euros range.

It also reiterated a target for gross merchandise volume (GMV) — sales on its site made by the company or its partners — to exceed €30 billion by 2025, almost triple the €10.7 billion in 2020.

By Emma Thomasson; editors: Riham Alkousaa and Ramakrishnan M. and Louise Heavens.

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