One of Europe’s largest online fashion retailers, Zalando managed to buck the trend of pandemic-related problems in some areas during Q1, but had to concede losses in others.
Zalando grew revenues by 10.6 percent in the first three months of the year to hit 1.52 billion euros. Zalando’s gross merchandise volume, or GMV, also went up 13.9 percent to reach 1.99 billion euros.
As the Berlin-based company has transitioned to being a platform, developing logistics and marketing relationships with suppliers rather than making its own products, it has argued that GMV is a better indicator of its success. The increase in GMV is higher than revenue because Zalando only collects commissions and service fees from partner brands, the company explained in a statement.
During the COVID-19 pandemic and the resulting closures of brick and mortar stores, Zalando’s platform model has expanded with the company trying to expedite entry to the program and payments back to partners during the pandemic.
Zalando boasted that 50 new partners joined the program in just the last three weeks. Newcomers included American Eagle Outfitters, Vaude and Next Group and the company said it would be extending the program to retailers in Spain, Sweden and Poland in the third quarter.
The company also grew active customers and site visits. Active users grew by 17 percent to reach 32 million, up from 27.2 million users in 2019, and site visits rose 23 percent from 923 million in the first quarter of 2019 to 1.13 billion this year. The number of shoppers going online accelerated even further in April.
The average order placed by those customers fell slightly, going from 57 euros per basket to 56.10 euros per basket. That equals a decrease of 1.5 percent.
Consumers bought twice as much sportswear online as during the same period the previous year, particularly for running and yoga. Loungewear had also proven popular and Zalando had seen three times as many orders for skin, nail and hair care, as well as items such as perfumed candles. Other best-sellers included children’s wear and socks, with sales of the latter doubling during the lockdown.
However, it was not all good news. Performance was “below expectations” due to the coronavirus, the company said. Despite ongoing growth in some sectors, Zalando has operated close to, or in the red, for several years now and only recently became regularly profitable. The company’s adjusted EBIT – earnings before interest and taxes, which show how well a company’s core operations are going – went from 6.4 million euros over the same period last year, to minus 98.6 million euros this quarter. Zalando said this was mostly due to “an exceptional inventory write down due to revised sales expectations for the current season” worth 40.2 million euros.
Unlike many other companies, that have said they cannot accurately predict the financial future due to uncertainties around the pandemic lockdown, Zalando offered guidance for the rest of the year. It adjusted guidance from February to take into account the impact of the pandemic, but was still positive. Zalando is now predicting growth in revenue and GMV of between 10 and 20 percent for the rest of the year. It also forecast an adjusted EBIT of between 100 and 200 million euros.
Despite being positive, the forecast was necessarily broad, the company said, to take into account potential uncertainties over the coming months.