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Nov 6, 2018
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Zalando swings to loss as hot weather hits summer sales, delays autumn

Published
Nov 6, 2018

A succession of retailers have announced tough times over the summer period and even the most buoyant names haven’t been immune. On Tuesday it was Zalando’s turn to admit to struggling as it unveiled a €39m loss for the three months to September.


Zalando



The Berlin-based e-tail giant said it was a “financially challenging quarter” and blamed the almost-unprecedented heatwave that not only saw temperatures hitting all-time highs but that lasted for months.

Sales in the quarter rose to €1.2bn from €1.1bn and while a revenue rise of 11.7% would be good by some companies’ standards, that’s not great compared to some earlier percentages the firm has turned in. And it’s less than it expects in Q4 too, with a prediction of sales rising between 20% and 25%.

The hot weather didn’t only reduce demand during the summer, but it also delayed the start of the autumn/winter season so the company took a double hit to its revenue. That meant average basket size fell more than 7% to €57.50 during the quarter.

Overall, Fashion Store revenue grew 10.8%, Off-price surged 40.2% and all other segments rose 22.9%. But Fashion Store remains the biggest chunk of the firm’s business.

The result of it all was that the company reported an adjusted loss before interest and tax (EBIT) for Q3 of €39m. And while it’s not exactly used to mega-sized profits as it’s still at an early stage in its development (a year ago its adjusted EBIT profit was a tiny €0.4m), that’s a big loss. Unadjusted EBIT was a loss of €55.7m this time compared to a much smaller €5.9m loss a year ago.

“We are clearly not happy with our financial results in the third quarter,” said co-CEO Rubin Ritter. “Our eyes are set on building the ecosystem for European fashion at full speed and our 2020 target of doubling the business to €10bn in gross merchandise volume. For the fourth quarter, the team’s full focus is now on pulling off a strong finish to the year.” 

And that Q4 prediction should hopefully mean that Q3’s weakness was just a blip. Zalando said it now has 25.1m active customers, which is equivalent to 6% of the European population, and an increase from 22.2m customers a year ago, so it’s certainly not lacking a customer base ready to buy into its offer. 

And that customer base seems to be very mobile-focused with mobile having made up an 80% share of site visits in the quarter.

For the full year, it’s expecting revenue growth “around the low end” of a range between 20% and 25% and its forecast adjusted EBIT of €150m-€190m.

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