At the beginning of November, Zalando announced its sales expectations for the fourth quarter. The online giant expects an increase of 20 to 25 percent. The company closed the last quarter with a margin of minus 3.2 percent.

Zalando’s been a busy month. With 27.7 million orders, the company booked more orders than ever before. However, external influences such as the hot summer and a delayed start into the autumn/winter season caused the company problems. But also homemade reasons such as investments in logistics or increased transport costs burdened the result. Zalando had therefore already lowered its sales forecast for the year as a whole in September and now presented precise figures for the third quarter. Accordingly, sales increased by 11.7 percent to 1.20 billion euros during this period. However, this resulted in an adjusted EBIT of minus 38.9 million euros and a margin of -3.2 percent. These figures are well below analysts’ estimates.

Zalando cites internal and external reasons for lower growth

The reasons for this poor performance are clearly cited by the Group. In addition to the later start into the autumn/winter season, the higher costs are partly responsible for this. These costs result from the inefficient processing of returned articles, which were due to operational errors. In addition, investments in the logistics infrastructure, a lower average shopping basket size and higher transport costs led to higher fulfillment costs. In addition, the partner program developed very strongly and influenced sales through the level of commission. Zalando Co-CEO Rubin Ritter: “We are clearly not satisfied with our financial results in the third quarter. This does not alter our goal of doubling our business to a gross volume of EUR 10 billion by 2020 and building up the fashion ecosystem in Europe at full speed. In the fourth quarter, the team’s focus will be on bringing the year to a successful conclusion.”

Final spurt: sales growth of at least 20 percent in last quarter

This successful conclusion also includes an expected sales growth of 20 to 25 percent in the last three months of the year. Overall, Zalando’s expectations for the 2018 financial year are now lower than they were a few months ago. The forecast is for sales growth around the lower end of the targeted range of 20 to 25 percent and adjusted EBIT of 150 to 190 million euros. The books are still full of high investment costs. Around 300 million euros will be invested in a further optimized logistics network and a number of investment projects.

 

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Link: Although the online giant Zalando expects a clear increase in the last quarter, it has revised its overall sales expectations for the current year downwards.

Image: Zalando

//KH