German online retailer Zalando posts heavy losses in Q3

BERLIN, Nov. 6 (Xinhua) — German online retailer Zalando recorded heavy losses and weaker than expected revenue growth in the third quarter (Q3), figures by the company showed on Tuesday.

Zalando’s revenue grew by 11.7 percent to 1.2 billion euros (1.36 billion U.S. dollars) in Q3, well below its official full-year growth target of 20-25 percent, while adjusted earnings before interest and taxes (EBIT) were deep in the red at minus 38.9 million euros. The company blamed the development on an unusually hot summer which had led to reduced consumer demand, as well as resulting delays caused to its seasonal switch to the fall/winter collections.

“We are clearly not happy with our financial results in the third quarter. Our eyes are set on building the ecosystem for European fashion at full speed and our 2020 target of doubling the business to 10 billion euros in gross merchandise volume”, a statement by co-chief executive officer (CEO) Rubin Ritter read. “For the fourth quarter, the team’s full focus is now on pulling off a strong finish to the year”, he added.

Zalando is confident that it can still grow revenues by 20-25 percent in Q4 2018 after what it described as a “financially challenging” Q3. The online retailer said that had continued to make progress on its “platform strategy, making further headway with both brands and customers” in spite of weak earnings during the last three-month period.

For the full year, Zalando said that it continues to expect an adjusted EBIT of 150-190 million euros. Capital expenditure is predicted to remain on elevated levels due to continued strong logistics and technology investments at 300 million euros in 2018.

A key component in Zalando’s business model is that it offers customers to a 100 days return policy for unwanted goods and allows them to defer payment until arrival of the goods in question (“payment after delivery”). Both of these policies create a significant financial risk for the online retailer, with more than 50 percent of items being returned again, according to media reports.

Based in the German capital Berlin, Zalando has nonetheless grown into Europe’s largest online fashion retailer with customers in major markets like Germany, Britain, Spain and France and around 2,000 available brands. (1 euro =1.14 U.S. dollars)

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