Et is not a good time for traders in non-essential goods. With inflation rates around 8 percent and energy prices rising by a good third, many consumers are wondering what they can do without. Fashion and cosmetics are obviously part of many – and that hits Europe’s largest trading platform for these goods – the Berlin Dax company Zalando – with force.
The group is already struggling to balance its business in the post-Corona period. After the pandemic, during which he and his investors were spoiled with success, Zalando recorded the first drop in sales in its company history at the beginning of the year. In the spring quarter from March to June, the group is now caught up with the crisis of war and inflation.
Earnings “significantly” below analysts’ expectations
So much so that the company’s management apparently felt compelled to announce in an ad hoc release on Thursday evening that growth in sales, profit and value via the platform of articles distributed (GMV) are “significantly” below current analyst expectations. As a result, its share price collapsed by a good 8 percent in after-hours trading. “The second quarter is profitable, but weaker than expected,” Zalando wrote.
The company did not reveal exact figures, Zalando wants to continue to present its quarterly results on August 4th. So you might think: profitable after all. Because in the first quarter of the year there was a deficit of 51.8 million euros in the operating result (adjusted and before interest and taxes). However, the point at which the announcement then gave concrete figures – with the corrected annual outlook – is likely to largely destroy the hopes of investors.
Growth forecast almost zero
Zalando roughly halved its earnings guidance and scaled back revenue growth expectations to almost zero. Instead of an operating result of at least 430 million euros this year, only between 180 and 260 million are now expected, instead of a sales growth of 12 percent only 0 to 3 percent. After the decline in sales in the first quarter of the year, it is now possible that Zalando will not grow for the whole year – these are new times for a company that started as a start-up and has since always defined itself through its growth.
The Berliners are still investing, even if they slightly reduce the annual budget from 400 to 500 million euros to 350 to 400 million. Nevertheless, the forecast is based on the fact that business will improve in the second half of the year and that growth will pick up again.
Zalando wants to get better, especially when it comes to profitability. In the past quarter, the company reduced its marketing expenses, changed its investments in its own logistics in order to achieve higher utilization of the individual dispatch centers and introduced minimum order values in 15 markets. This means that customers in almost all of the group’s 25 countries now have to reach a minimum order amount in order to have their fashion delivered free of charge. In Germany, this minimum order value is 24.90 euros.
Nevertheless, it is unclear whether Zalando will achieve its long-term goal of selling goods for 30 billion euros by 2025. According to the lowered forecast, GMV is expected to reach around 15 billion this year. But that would only be half of the way. “While the current environment is having a negative impact on our financial development, our strategy and long-term goals remain unchanged,” said Co-CEO Robert Gentz bravely.
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