Zalando upbeat as revenues soar, losses narrow, despite higher investment spend

By

Sandra Halliday

Published
Oct 31, 2019

Just a day after announcing that it was going completely carbon neutral, online retail giant Zalando had more big news on Thursday as it issued its third-quarter results and announced that its revenues continue to soar. Like many companies still at a relatively early stage in its development and investing heavily in its operations, it remains loss-making, but its losses are narrowing fast year-on-year.

The company reported revenue growth of 26.7% to €1.5 billion with gross merchandise value (GMV) up 24.6% to €1.9 billion. That growth came as it topped 1 billion site visits in a single quarter for the first time in its history due to a 37.3% increase, and its active customer base grew 17.5% to reach 29.5 million people.

And the company looks like it has plenty of potential to continue growing at a rapid pace with no hint of a slowdown and plenty of expansion plans. Its latest is its plan to further internationalise its off-price business via the launch of Zalando Lounge in the Czech Republic. And of course, that carbon neutral strategy could be key in winning over increasingly eco-conscious consumers.

The company saw order numbers rising 25.4% during the period to reach 34.7 million and average orders per active customer rose 7.6% to 4.6 from 4.3, although the average basket size dipped by 1.9%. And it's interesting that 84.8% of site visits now come from mobile, compared to 80% a year earlier.

As we said, the company is still loss-making with a net loss this time of  €13.6 million. But that was so much better than the €41.7 million loss of a year earlier. And the improvement came even though the company's capital expenditure increased by almost €18 million. Meanwhile, on an operating level, the company was profitable, with a positive adjusted EBIT of €6.3 million compared to a loss on this basis of almost €39 million a year ago.

CFO David Schröder said 2019 has been “a very successful year for us so far. We had a strong third quarter with more active customers who more and more frequently look for inspiration on Zalando. We are growing at a high pace across all regions.”

During the quarter, the DACH region’s revenues rose 22.9%, while business in the Rest of Europe region grew an even faster 30.8%. Growth was particularly strong in Spain, the Nordics, and the Czech Republic, “where the business has grown at a high pace since the launch one year ago,” hence the expansion of Zalando Lounge there in the fourth quarter.

As mentioned, the company also has that big carbon neutral initiative to focus on across the operation and said that it will design its packaging to minimise waste and keep materials in use, specifically eliminating single-use plastics. Already, Zalando boxes are made from 100% recycled materials, shipping bags from 80% recycled plastics and beauty bags from 100% recycled paper. 

And its private label ZIGN “fully commits to sustainability” by SS20. All items of the SS20 collection will feature Zalando’s sustainability flag in the Fashion Store.